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Aussie Halts Gains on Speculation Economy Will Trail U.S. Growth

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Dec. 9 (Bloomberg) -- Australia’s dollar halted a two-day gain versus the U.S. currency on prospects the local economy will lag an improvement in U.S. growth, damping demand for the South Pacific nation’s assets.

The New Zealand dollar rose for a second day versus the yen as a report from China showed exports gained last month by more than forecast in a sign global demand is helping sustain a recovery in the world’s second-biggest economy. A Dec. 6 report showed the U.S. unemployment rate fell to a five-year low, while one due this week is forecast to show Australia’s jobless rate rose. Japanese investors bought more Australian debt securities than they sold in October, ending 12 months of net sales, data from the Asian nation showed today.

“It’s very much to do with the U.S. story,” said Timothy Riddell, the Singapore-based head of Asian global markets research at Australia & New Zealand Banking Group Ltd. “The bias is that we’re likely to see some consolidation rather than a reversal. We’re going to be in a 90.50 to 92-cent range in the next week or so.”

The Australian currency fell 0.2 percent 90.84 U.S. cents as of 5:53 p.m. in Sydney after gaining 0.8 percent in the previous two sessions. It was little changed at 93.61 yen and fell to a five-year low of NZ$1.0961 versus the kiwi.

New Zealand’s currency was little changed at 82.86 U.S. cents and climbed 0.2 percent to 85.38 yen.

Unless the Aussie is able to advance above 92.20 U.S. cents, its downside bias will remain intact and “we’re still likely to get another leg lower into the new year,” Riddell said.

Japan Buying

Japanese investors net purchased 155.8 billion yen ($1.5 billion) of Australian dollar securities in October, the first month of buying since October 2012. They bought 129.9 billion yen of sovereign bonds, in a fifth straight month of purchases.

Investors in the Asian nation remain cautious given concerns about declines in the currency, said Martin Whetton, a interest-rate strategist in Sydney for Nomura Holdings Inc., Japan’s biggest brokerage.

“When they know that the RBA has stopped cutting rates and talking down the Australian dollar, the Japanese will return to the market more fully,” he said. “There’s a bit of a mismatch right now between the needs of the Australian government as a borrower and the needs for a lower currency that the central bank is highlighting.”

The share of offshore holdings in outstanding Australian government securities shrank to 68.2 percent in the third quarter from 69.1 percent at the end of June and a record 76.1 percent in June 2012, official data show.

Cut Bets

The Aussie dollar “is still uncomfortably high,” central bank Governor Glenn Stevens said last week in a statement accompanying the bank’s decision to keep interest rates at a record low 2.5 percent. There’s a 37 percent chance policy makers will lower the benchmark by June, swaps data compiled by Bloomberg show.

The nation’s three-year bond yields fell five basis points, or 0.05 percentage point, to 3.08 percent. The 10-year rate declined six basis points to 4.37 percent.

U.S. employers added 203,000 jobs in November and the jobless rate fell to 7 percent, a report last week showed. The median forecast in a Bloomberg News survey was for 185,000 job gains and a decline in the unemployment rate to 7.2 percent.

Australia’s unemployment rate probably rose to 5.8 percent in November from 5.7 percent, according to a Bloomberg survey before a report on Dec. 12.

China, Australia’s largest trading partner, said yesterday that exports increased 12.7 percent in November from a year earlier, while imports rose 5.3 percent. A Bloomberg poll had predicted 7 percent growth for both.

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net

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