Aussie Falls From 4-Month High on Bets Gain Was Excessive

The Australian dollar weakened from a level that matched the highest in almost four months as technical indicators signaled gains in the currency may have been too rapid.

The so-called Aussie slid versus most of its 16 major counterparts after data showed inflation in China, the South Pacific nation’s biggest trading partner, quickened more than expected and spurred concern policy makers will struggle to balance price gains and growth. New Zealand’s currency retreated from a three-week high as Asian stocks pared an earlier advance.

“The fact that the Aussie struggled so hard to break through the $1.06 level and didn’t quite make it made people wonder whether it’s due for a little bit of a pullback,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “It’s broadly going to be supported on dips.”

The Australian dollar lost 0.1 percent to $1.0584 as of 4:55 p.m. in Sydney after earlier rising to $1.0599, matching the high reached yesterday that was the strongest level since Sept. 14. It gained 0.2 percent to 94.29 yen. New Zealand’s dollar touched 84.61 U.S. cents, the most since Dec. 17, before trading at 84.26, 0.4 percent lower than yesterday’s close. It bought 75.06 yen from 75.08 in New York.

The MSCI Asia Pacific Index of shares was little changed from yesterday earlier gaining as much as 0.3 percent.

Relative Strength

The Australian dollar’s relative strength index versus the greenback reached 68 yesterday, near the 70 level that some traders see as a sign it has risen too quickly and may be due to reverse course. Against the yen, it was at 78 today.

China’s National Bureau of Statistics said today the consumer price index rose 2.5 percent last month from a year earlier. That compares with the 2.3 percent median estimate in a Bloomberg News survey and a 2 percent gain in November.

Gains in the Aussie were capped as National Australia Bank Ltd. lowered its estimate for the nation’s growth this year to 2 percent from 2.5 percent previously. The Reserve Bank of Australia’s key rate will probably fall to 2.25 percent in the third quarter from the current 3 percent, analysts led by Chief Economist Alan Oster wrote in a report today.

“With the economy continuing to weaken and unemployment set to rise noticeably through 2013, the RBA will need to cut significantly further than previously expected,” economists at the Melbourne-based lender wrote.

Rate Bets

Interest-rate swaps data compiled by Bloomberg show traders see a 77 percent chance RBA Governor Glenn Stevens will cut the cash rate to a record 2.75 percent or lower by the middle of this year. Central bank policy makers will next meet on Feb. 5.

The Australian dollar gained 0.2 percent in the past week, according to Bloomberg Correlation-Weighted Indexes, a set of gauges that track 10 developed-nation currencies. Its New Zealand counterpart rose 0.6 percent.

Physical iron ore with 62 percent content at the Chinese port of Tianjin advanced to $158.50 a ton on Jan. 8, the highest close since October 2011, according to The Steel Index Ltd. The metal is Australia’s biggest export.

Australia’s 10-year bond fell, pushing the yield up as much as six basis points, or 0.06 percentage point, to 3.5 percent, a level unseen since Aug. 17. It closed the day at 3.47 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates which is sensitive to interest-rate expectations, fell one basis point to 2.80 percent.

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