Aussie Dollar Snaps Two-Day Gain Amid China Selloff Before FOMCKevin Buckland
The Australia’s dollar snapped a two-day gain after the collapse of a private developer pushed down China’s stocks and the yuan, dimming the outlook for the nation’s largest export market.
The Aussie retreated from the highest in three months against its U.S. peer as the Federal Reserve prepares to set policy today. The currency found support after declines were limited in a private index of leading economic indicators. New Zealand’s dollar fell for the first time in three days after touching an 11-month high yesterday.
“There’s been some profit taking off the recent highs” in both the Australian and New Zealand dollars, said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong. Events in China are weighing on the currencies, she said.
Australia’s dollar slipped 0.2 percent to 91.13 U.S. cents as of 6:47 p.m. in Sydney from yesterday, after earlier touching 91.38, the highest since Dec. 11. New Zealand’s dollar fell 0.2 percent to 86.06 U.S. cents after reaching 86.40 yesterday, a level unseen since April 12.
China’s stocks fell and the yuan weakened near an 11-month low after the collapse of a private developer spurred concern the industry may face defaults as economic growth slows. Money-market rates jumped.
Australia’s currency faces technical resistance to further gains as it approaches the convergence of the 200-day moving average, a downward trendline from recent highs and the December “swing high,” according to CMC Markets.
“This is a very tough area to beat for Aussie at the moment, because you’ve got three different resistance points all coming into play,” said Desmond Chua, a Singapore-based analyst at CMC Markets. “Of course this could all be changed with the Fed decision, but I think these levels will be respected for most of the day.”
The Federal Open Market Committee will conclude its first meeting today after Janet Yellen succeeded Ben S. Bernanke as chair last month. The Fed will probably scrap its 6.5 percent jobless-rate threshold in favor of qualitative guidance for signaling when it will consider raising the benchmark interest rate, according to a Bloomberg News survey of economists.
Australia’s Leading Economic Index, released by Westpac Banking Corp. and Melbourne Institute in Sydney today, fell 0.1 percent last month. That matched a 0.1 percent decline the previous month, revised from a 0.2 percent drop.
Australia’s 10-year government bond yield slid two basis points, or 0.02 percentage point, to 4.07 percent.
New Zealand’s dollar will approach a record high set in August 2011 after briefly retreating amid signs that recent gains have been excessive, CMC Markets’ Chua said.
The kiwi may test 88.43 U.S. cents, the strongest level since it was freely floated in 1985, after pulling back to near 84 U.S. cents, according to Chua. The currency’s 14-day relative-strength index reached 77 yesterday, signaling it may have risen too far, too fast.