Australian Dollar Climbs After China Growth Matches ForecastsLucy Meakin and Masaki Kondo
Australia’s dollar strengthened after a report showed China’s economy grew 7.5 percent in the second quarter, matching economists’ estimates.
The U.S. dollar extended gains against the yen and euro from the end of last week before data on retail sales today that may add to the case for the Federal Reserve to reduce monetary stimulus. The Bloomberg Dollar Index last week posted its first drop in a month after Fed Chairman Ben S. Bernanke, who is scheduled to testify on monetary policy this week, signaled that bond buying won’t be dialed back soon. Financial markets in Japan are closed today for a national holiday.
“At the margin, the Chinese GDP data is supportive for the Aussie given the exaggerated growth fears,” said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong. “Hence, the Aussie dollar is holding small gains.”
The Aussie jumped 0.4 percent to 90.89 U.S. cents at 8:01 a.m. London time. It advanced against all of 16 major peers tracked by Bloomberg, strengthening most versus the Singapore dollar and Swiss franc.
The dollar added 0.2 percent to 99.37 yen following a 0.3 percent gain on July 12. It strengthened 0.2 percent to $1.3048 per euro after rising 0.2 percent at the end of last week. The euro was little changed at 129.68 yen.
The Australian currency dropped last week after Chinese Finance Minister Lou Jiwei said this year’s expected growth rate is 7 percent and China can reach that. The official Xinhua News Agency later corrected its English-language report on Lou to say there’s no doubt that China can achieve this year’s growth target of 7.5 percent.
China’s gross domestic product grew 7.5 percent in the April-June period, the National Bureau of Statistics said in Beijing today, matching the median estimate of economists in a Bloomberg poll. It expanded 7.7 percent in the first quarter.
Futures traders raised bets that the dollar will strengthen against the yen, figures from the Washington-based Commodity Futures Trading Commission show. Wagers by hedge funds and other large speculators on a gain in the greenback outnumbered those on a decline by 80,305 on July 9, the most since June 4. That compared with so-called net longs of 70,736 a week earlier.
The U.S. Commerce Department will say today that retail sales rose 0.8 percent in June, according to the median estimate of economists surveyed by Bloomberg News. It would be the fastest gain since February.
“The U.S. economy looks to be on a recovering trend,” said Mike Jones, a Wellington-based currency strategist at Bank of New Zealand Ltd. “The trend, we think, is for a stronger U.S. dollar given our expectation that tapering will come in this year.”
The Fed buys $85 billion of Treasuries and mortgage debt each month as part of its quantitative-easing program to cap borrowing costs. Bernanke on July 10 damped speculation that the Fed would slow its bond-buying program.
“Highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy,” he said that day. Bernanke will deliver a semi-annual monetary policy report to Congress July 17-18.
The Bloomberg Dollar Index, which tracks the greenback against 10 other major currencies, was little changed at 1,038.30. It lost 1.6 percent last week, the biggest slide since June 7.