Dollar Rallies With Haven Currencies as China Imports Decline

  • Aussie dollar snaps longest rally in more than six years
  • Yen and Swiss franc advance versus most major counterparts

The dollar strengthened for the first time in four days, rallying along with the Swiss franc and the yen, as a report showing Chinese imports declined more than forecast added to concern the world’s second-largest economy is slowing.

Investors dumped higher-yielding currencies in favor of havens, halting the Australian dollar’s longest rally in more than six years and sending New Zealand’s dollar down for the first time in 11 days. China is the major trading partner for both Australia and New Zealand. Switzerland’s franc and the Japanese currency rose as traders exited bets on riskier assets that are often funded using these currencies.

“When risk sentiment worsens, there’s an unwinding of those trades and that tends to help to support those currencies,” said Eric Viloria, a strategist at Wells Fargo & Co. in New York. The trade report “suggests some softening of demand from China, so that’s probably contributed to some of the weakness in some of the commodity-related currencies.”

The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 peers, added 0.2 percent as of 5 p.m. in New York, after closing on Monday at its lowest since Aug. 24.

Australia’s dollar tumbled 1.6 percent to 72.45 U.S. cents, after strengthening 5.4 percent during the previous nine days in the longest winning streak since March 2009. New Zealand’s currency dropped 1.1 percent to 66.42 U.S. cents after the nation’s central bank said it was likely to ease monetary policy.

Aussie Vulnerable

The franc and the yen climbed versus most of their 16 major peers as China’s customs administration said imports slumped for an 11th month in September, sliding 17.7 percent in yuan terms from a year earlier. Exports fell 1.1 percent, compared with a 6.1 percent decline the previous month.

“The main view that we have expressed in our portfolio is long dollar, short euro, short Aussie,” amid concern about global growth, said David Leduc, Boston-based chief executive officer of Standish Mellon Asset Management Co., which is owned by Bank of New York Mellon Corp. He was referring to bets that the greenback would rise while the other currencies would fall.

The currencies of commodity exporters had rebounded in recent weeks as traders pushed back forecasts for when the Federal Reserve will raise interest rates.

The Australian dollar was the most vulnerable to reversal at any time in the past 18 months on Monday. The currency’s 14-day relative-strength index climbed to 71, above the level of 70 that some traders see as a signal it has risen too far, too fast. The last time it was above that level was in April 2014.

“It’s squarely on the Chinese report,” said Neil Jones, London-based head of hedge-fund sales at Mizuho Bank Ltd. “There is a strong correlation there and some of the shine has come off the commodities themselves. It’s across the board as far as commodity-based currencies” being hurt.

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