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Aussie Slides With Bonds on China Caution, Declining Sentiment

Australia’s dollar fell to a six-week low and bonds dropped as traders weighed prospects for growth in China, the South Pacific nation’s biggest trading partner, before a four-day Communist Party summit ends today.

The currency also declined after a report from National Australia Bank Ltd. showed business confidence fell by the most since 2011. Australia’s 10-year government bond yields climbed to the highest in more than 1 1/2 years. New Zealand’s dollar touched the lowest level this month.

“The market has taken on board that things are improving perhaps not only not as fast as people thought, but not at all,” Ray Attrill, the Sydney-based global co-head of currency strategy at NAB. “The sentiment at the moment is a little bit bearish on the Aussie, which essentially means that news that can be seen as negative is likely to resonate.”

Australia’s dollar lost 0.3 percent to 93.36 U.S. cents as of 5:09 p.m. in Sydney after touching 93.25, the weakest since Oct. 1. It has tumbled 2 percent over the past four days. New Zealand’s currency dropped 0.2 percent to 82.33 U.S. cents after reaching 82.06, the lowest since Oct. 30.

Benchmark 10-year bond yields in Australia rose seven basis points, or 0.07 percentage point, to 4.29 percent, the highest since March 2012.

Sentiment Slides

A sentiment gauge among Australian businesses fell to 5 in October from 12 the prior month, NAB said today. A measure of business conditions was unchanged at minus 4. NAB separately pushed back its forecast for a Reserve Bank of Australia rate cut to May from February, citing a slower increase in unemployment.

Traders see a 16 percent chance that the RBA will cut its benchmark interest rate from a record-low 2.5 percent by February, compared with 22 percent odds at the start of this month, according to interest-rate swaps data compiled by Bloomberg.

In China, President Xi Jinping and hundreds of top Communist leaders are gathered in Beijing to map out an economic blueprint to sustain growth and drive the urbanization of hundreds of millions of rural residents.

“There’s a cautious tone with China’s third plenum going on,” said Stan Shamu, a Melbourne-based market strategist at IG Ltd. “The Aussie is starting to get comfortable below 94 U.S. cents.”

China’s growth will slow to 7.6 percent this year compared with 7.7 percent in 2012, and then further decelerate to 7.4 percent in 2014, according to the median estimates of economists in a Bloomberg poll.

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