Australian, N.Z. Dollars Rise Versus Yen After China PMI

The Australian and New Zealand currencies rose versus the yen after a survey of companies showed Chinese manufacturing expanded at the fastest pace in two years, brightening the outlook for commodity exports.

The South Pacific dollars advanced against their Japanese counterpart after the announcement by HSBC Holdings Plc and Markit Economics for the preliminary reading of a Purchasing Managers’ Index for China beat analysts’ forecasts. The so-called Aussie weakened versus New Zealand’s dollar as signs of limited inflation in the larger economy caused traders to add to bets on the size of interest-rate cuts this year.

“We have seen a bounce back in the Australian and New Zealand dollars due to the Chinese PMI data,” said Tim Waterer, a senior foreign-exchange dealer at CMC Markets in Sydney. “The fact that we’ve seen another improvement in Chinese activity lends itself to support a currency like the Aussie, which is hypersensitive to all things Chinese.”

Australia’s dollar rose 0.4 percent to 93.94 yen as of 4:52 p.m. in Sydney. It fell 0.4 percent to $1.0517 and slid 0.4 percent to NZ$1.2473. New Zealand’s currency gained 0.9 percent to 75.32 yen and added 0.1 percent to 84.31 U.S. cents.

The preliminary reading of the PMI Index was 51.9 in January, according to a statement from HSBC Holdings Plc and Markit Economics today. That compares with the 51.5 final reading for December and the 51.7 median estimate of analysts surveyed by Bloomberg News.

China is Australia’s largest trading partner and New Zealand’s second-largest export destination.

Inflation Contained

Australia’s dollar fell for a third day against the so-called kiwi after figures yesterday for consumer prices were lower than economists projected, increasing prospects for a central-bank rate reduction on Feb. 5.

Swaps traders are betting the Reserve Bank of Australia will lower its benchmark rate by 53 basis points over a year, up from 49 basis points yesterday, according to a Credit Suisse Group AG index. There is a 52 percent chance the RBA will lower borrowing costs next month, data compiled by Bloomberg show.

“There’s a bit of chatter about next month or the month after that for the RBA, so that may have hurt the Aussie a little bit,” said Michael Turner, a fixed-income strategist in Sydney at Royal Bank of Canada.

Yields on Australia’s three-year bonds fell as low as 2.68 percent, the lowest least since Dec. 31.

Aussie ‘Overvalued’

The Aussie is “overvalued and we think it’s been driven up for the wrong reasons,” said Euan Munro, the Edinburgh-based head of multi-asset investing and fixed income at Standard Life Investments, which manages more than $250 billion. Chinese spending will be “less resource intensive” going forward, denting demand for Australian commodities, he said during an event in Sydney via videoconference.

Munro said he is betting that Australia’s dollar will fall versus the Mexican peso as the North American nation benefits from an increase in Chinese labor costs.

The Australian dollar declined 0.5 percent to 13.33 pesos.

Before it's here, it's on the Bloomberg Terminal.