Aussie Dollar Falls as China Slowdown Adds to Iron-Ore Concern

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Australia’s dollar fell as slowing growth in China, the biggest buyer of the nation’s iron-ore exports, threatens its economy.

Australia’s currency was less than 1 percent from a six-year low after a report on Wednesday showed China’s economy expanded last quarter at the slowest pace since 2009 and industrial production missed even the lowest forecast of economists. Standard & Poor’s signaled this week it may cut Western Australia’s AA+ credit rating because of plunging ore prices.

“The annual growth is a step down from the previous quarter,” said Janu Chan, a senior economist in Sydney at St. George Bank, a unit of Westpac Banking Corp. “Because of those downside risks for China and commodity prices, we still see a weaker Aussie.”

Australia’s dollar fell 0.4 percent to 75.98 U.S. cents as of 10:55 a.m. in London, after tumbling to as low as 75.72 cents. It reached 75.33 cents on April 2, the weakest level since May 2009 and on Wednesday slipped as much as 0.6 percent to NZ$1.0078.

The Bloomberg Dollar Spot Index rose amid demand for the U.S. currency as a haven, following its first decline in four days Tuesday after March retail sales rebounded less than economists forecast. The index, which tracks the greenback against 10 major peers, climbed 0.3 percent to 1,203.52, following a 0.7 percent drop the previous day.

China Slowdown

Gross domestic product in China slowed to 7 percent in the first quarter from a year earlier, the statistics bureau said in Beijing Wednesday, matching the median estimate of economists in a Bloomberg survey of analysts.

Industrial production grew 5.6 percent in March, missing the range of 6.2 percent to 7.8 percent forecast by economists.

“A weaker-than-expected set of activity indicators from China has allowed the USD to take back a small amount of the post-retail sales weakness,” Michael Turner, a debt and currency strategist at Royal Bank of Canada in Sydney, wrote in a note. “This is particularly evident in AUD.”

Australia’s Treasurer Joe Hockey plans to discuss iron-ore demand with his Chinese counterpart after rising output from BHP Billiton Ltd. and Rio Tinto Group helped drive prices below $50 a metric ton. Hockey, who’s in the U.S. to attend a meeting of the Group of 20 finance ministers, said in an interview with the Australian Financial Review this month that $35 is a level he’s contemplating for the budget on May 12.

The Aussie has depreciated 19 percent in the past 12 months against its U.S. peer, while iron ore plunged 56 percent to $50.78 a ton.

There’s a better than 70 percent chance the Reserve Bank of Australia will cut interest rates next month, swaps data compiled by Bloomberg show.

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