Aussie Sinks Below 70 U.S. Cents as Growth Weakest Since 2011

  • Currency has tumbled 3.9% over past month as China slumps
  • Second-quarter GDP expansion 0.2%; half economists' forecast

The Australian dollar extended a drop that took it below 70 U.S. cents for the first time in six years after a report showed the economy matched the weakest growth since 2011 amid signs of a slump in China.

The currency fell to as low as 69.82 cents Wednesday. It has dropped 3.9 percent over the past month, the biggest loss among Group-of-10 currencies, as stocks slid. Swaps pricing shows about a 51 percent chance the Reserve Bank of Australia will lower its benchmark interest rate at a November meeting.

“We’ve got 68 cents as our forecast for early next year and, at the moment, you’d have to say the risk is clearly to the downside” for the Aussie, said Ray Attrill, the global co-head of currency strategy in Sydney at National Australia Bank Ltd. “Given the market is extremely short here, we’re going to need to see evidence that the pricing in of RBA easing is going to be vindicated.”

Australia’s currency was little changed at 70.24 U.S. cents as of 12:19 p.m. in Tokyo, from 70.19 in New York on Tuesday.

The Australian economy expanded 0.2 percent in the three months ended June 30 from the previous quarter, matching the slowest pace since the first three months of 2011, a report Wednesday showed. Economists in a Bloomberg survey had predicted a 0.4 percent expansion.

“In Australia, most of the available information suggests that moderate expansion in the economy continues,” Stevens said Tuesday after leaving the key rate at a record-low 2 percent following reductions in May and February. “The Australian dollar is adjusting to the significant declines in key commodity prices.”

Hedge funds and other money managers boosted net bearish bets on the Aussie to 63,727 contracts in the week to Aug. 25, according to data from the Commodity Futures Trading Commission. That’s up from 49,883 a week earlier and is the most since March.

China’s official Purchasing Managers’ Index dropped to 49.7 for August, the weakest in three years, a report showed Tuesday. Numbers below 50 indicate contraction.

“The Aussie is suffering from a more risk-averse global backdrop and a continuing weak China story,” said Imre Speizer, a senior market strategist at Westpac Banking Corp. in Auckland. “Risk currencies should suffer in this climate, including the Aussie.”

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