Aussie, N.Z. Dollars Drop After China Economy Slows; Bonds Rise

The Australian and New Zealand dollars dropped by the most in almost two months after growth in China’s economy unexpectedly slowed, damping prospects for the nations’ commodity exports.

New Zealand’s dollar, which had climbed last week to within 2 U.S. cents of a record high, weakened by the most among 10 major developed-nation currencies. Australian bonds rose as stocks fell in the Asia-Pacific region. The Reserve Bank of Australia will tomorrow release minutes of the meeting this month when policy makers refrained from cutting interest rates.

“The Aussie and kiwi, which are two key risk proxies, are weaker on the release of Chinese data,” said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong. “It’s disappointing that the recovery in China hasn’t taken hold as expected and it looks like instead the first quarter is proving to be a little bit softer.”

Australia’s dollar fell 0.7 percent to $1.0438 as of 4:02 p.m. in Sydney from April 12, heading for its biggest decline since Feb. 20. It touched $1.0582 on April 11, the highest since Jan. 11. The currency lost 1.1 percent to 102.2 yen.

The New Zealand dollar, known as the kiwi, dropped 1.1 percent to 84.98 U.S. cents. The currency had touched 86.76 cents last week, the strongest level since August 2011 when it had reached a post-float high of 88.43. It weakened 1.5 percent to 83.21 yen.

Australia’s government bonds rose, pushing the 10-year yield down six basis points, or 0.06 percentage point to 3.24 percent. The currency’s three-month risk reversal was at minus 1.4275 after touching minus 1.3075 on April 12, the highest since October 2009.

The MSCI Asia Pacific Index of stocks declined 0.8 percent, following a 0.4 percent drop by the MSCI World Index on April 12.

China Economy

China’s gross domestic product expanded 7.7 percent in the three months ended March 31 from a year earlier, the National Bureau of Statistics said in Beijing today. That compared with the 8 percent median estimate in a Bloomberg News survey and 7.9 percent growth in the fourth quarter.

Today’s report also showed industrial output in March rose 8.9 percent, less than the median estimate of 10.1 percent in a Bloomberg survey. Retail sales grew 12.6 percent, matching the median forecast. China is the biggest trading partner of both Australia and New Zealand.

In Australia, the number of home loans granted to build or buy houses and apartments increased 2 percent in February from the previous month, when the figure declined a revised 0.3 percent, the statistics bureau said today. The median estimate of economists in a Bloomberg poll was a 1.5 percent gain.

RBA Meeting

At its April 2 meeting, the RBA left the cash target rate at 3 percent. Interest-rate swaps data compiled by Bloomberg show traders see a 32 percent chance the central bank will lower the benchmark to a record 2.75 percent on May 7.

“The RBA’s view is that the Australian economy is slowly picking up towards trend,” Hans Kunnen, chief economist in Sydney at St. George Bank Ltd. “We think the RBA may be a little over-optimistic in its expectations for business investment. We’re still expecting another rate cut” around September, he said.

The difference in the number of wagers by hedge funds and other large speculators on an advance in the Australian dollar against the U.S. currency compared with those on a drop was 77,879 on April 9, compared with net longs of 83,971 a week earlier, according to figures from the Washington-based Commodity Futures Trading Commission. Net longs on the New Zealand dollar versus the greenback were 25,150 in the same week, the most since July 2007.

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