Aussie Extends Gain as Traders Hold Rate Bets After China PMI

The Australian dollar extended a gain from last week as investors maintained bets on a greater than 50 percent chance the nation’s central bank will raise interest rates within a year as the economy strengthens.

The Aussie erased a decline of as much as 0.4 percent that came after a private report showed manufacturing weakened for a fifth straight month in China, Australia’s largest trading partner. New Zealand’s dollar gained versus the yen for the first time in three days as Asian stocks climbed, boosting demand for higher-yielding assets.

“The Australian economic story is decoupling a little bit from China and our economic success is less in their hands and that’s probably why you’ve seen a more muted reaction to that number,” said Thomas Averill, a managing director in Sydney at Rochford Capital, a currency and rates risk-management company. Investors are no longer as bearish on the Aussie as they were a few months ago, he said.

The Australian dollar rose 0.1 percent to 90.93 U.S. cents as of 5:45 p.m. in Sydney, following a 0.6 percent gain last week. It climbed 0.3 percent to 93.15 yen. Yields on 10-year Australian government debt rose one basis point, or 0.01 percentage point, to 4.17 percent.

The New Zealand dollar was little changed at 85.35 U.S. cents, and gained 0.2 percent to 87.45 yen.

Traders are predicting the Reserve Bank of Australia will add 16 basis points to its 2.5 percent cash rate over a year, according to a Credit Suisse Group AG index based on swaps.

A Chinese Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics dropped to 48.1 for March in a preliminary reading, compared with the 48.7 median estimate of analysts surveyed by Bloomberg News and February’s 48.5 final figure. Numbers above 50 signal expansion.

Leveraged funds reduced net positions betting on Aussie declines by 25,643 contracts to 15,370 in week ended March 18, the least since October, according to data from the Washington-based Commodity Futures Trading Commission show.

The Australian dollar’s rally may stumble unless it can rise through so-called resistance between 91.20 and 91.40 cents, said Averill. “Unless the Aussie can hurdle that soon, it may get a bit of downward selling pressure again,” he said.

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