Aussie Retreats From Four-Month High on U.S. Debt Deal

Australia’s dollar dropped against all of its major peers amid speculation traders sought to lock in profits after the currency reached a four-month high.

The Aussie earlier touched the strongest since June versus the yen and the greenback before U.S. lawmakers voted to end a fiscal impasse that threatened to trigger a default. Demand for Australia’s currency was also damped after China’s Ministry of Commerce said the nation’s exports will face pressure. New Zealand’s kiwi dollar touched a five-month high.

“This is a little bit of profit taking on long positions established in anticipation” that the U.S. debt deal would be reached, said Ray Attrill, the global co-head of currency strategy at National Australia Bank in Sydney. “The Aussie and the New Zealand dollar have been the strongest two G-10 currencies in the last 24 to 48 hours.”

The Australian dollar declined 0.4 percent to 93.98 yen as of 4:57 p.m. in Sydney after reaching 94.50, the strongest since June 6. It was little changed at 95.49 U.S. cents from yesterday after touching 95.69, the highest since June 18.

New Zealand’s currency retreated 0.2 percent to 83.07 yen. It added 0.2 percent to 84.39 U.S. cents after trading at 84.46, the highest since May 9.

The U.S. House of Representatives voted 285-144 to clear a measure to fund the government and lift the debt limit and President Barack Obama signed the bill. It puts federal employees back on the job and permits the government to continue paying its debts, benefits and salaries.

China Trade

China’s exports will face pressure from weakening demand in emerging markets, Shen Danyang, a spokesman for the Ministry of Commerce, said at regular briefing today.

The nation’s Bureau of Statistics is likely to say tomorrow that gross domestic product expanded 7.8 percent in the July-September period from a year earlier, according to the median estimate of economists surveyed by Bloomberg News. The country, Australia’s biggest overseas market, grew 7.5 percent in the second quarter.

If tomorrow’s data confirm a pickup in China’s growth, “any dip in the Aussie that we’ve seen on profit taking on the fiscal deal will probably give way to some renewed enthusiasm for the Aussie,” NAB’s Attrill said.

Yields on Australia’s three-year government note declined 10 basis points, or 0.1 percentage point, to 3.07 percent. They climbed to 3.21 percent yesterday, a level unseen since April 2012.

Pimco’s View

The Aussie at 95.50 U.S. cents means short-term interest rates in the nation will be “lower for even longer,” Robert Mead, a Sydney-based portfolio manager at Pacific Investment Management Co., wrote in a Twitter post. The Reserve Bank of Australia has kept the benchmark rate at a record 2.5 percent since August.

The Australian dollar’s two-year decline versus its New Zealand counterpart may have set it up for a rally, trading patterns suggest.

The Aussie’s 17 percent drop since March 2011 against the kiwi made the currency its most oversold in 10 years, monthly stochastics show. Failure to break below a so-called level of support around NZ$1.1200 has created a reversal pattern that may lead it to rally as much as 6 percent, according to Citigroup Inc., the world’s second-largest currency trader.

The bigger nation’s currency has weakened against the kiwi amid speculation the Reserve Bank of New Zealand will raise the official cash rate from 2.5 percent. Traders are almost certain that the RBNZ will increase borrowing costs by June, according to data compiled by Bloomberg on overnight-index swaps.

The Aussie’s exchange rate declined 0.1 percent to NZ$1.1318 today. It touched NZ$1.12 on Aug. 1, the lowest since October 2008.

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