Currency World Splits Into Winners, Losers on China Trade Woes

  • Real, Aussie, kiwi tumble as commodities outlook dims
  • Havens franc, yen benefit as carry trades are reversed

China is again calling the shots for foreign-exchange traders.

Currencies linked to raw-materials exporters are tumbling against the dollar as Chinese imports declined for an 11th month, adding to concern that a slowdown in the world’s second-largest economy will damp global growth. Refuges, including the Swiss franc and the yen, are rebounding. Investors are unwinding trades that used those currencies to buy higher-yielding assets after the Federal Reserve held rates near zero last month. 

Here’s Tuesday’s breakdown.

Selling Pressure

Brazil’s real led losses by the dollar’s major peers, declining the most in two weeks versus the greenback.

“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.

The Australian dollar snapped its longest streak of gains since March 2009.

New Zealand’s currency fell for the first time in 11 days.

China is the major trading partner for both Australia and New Zealand.

Heading higher

The nation’s customs administration said imports slid 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.

That prompted traders to exit bets on riskier assets that are often funded using low yielders such as the Swiss franc and yen.

The Swiss franc advanced versus 30 of its 31 major counterparts, touching its strongest versus the dollar since Sept. 18, the day after the Fed’s meeting.

The yen climbed a second day against the dollar, reversing last week’s losses. Japan’s currency is poised to close at its highest in two weeks.

“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.

Bloomberg’s Dollar Spot Index advanced for the first time in four days after closing at its lowest since Aug. 24.

Before it's here, it's on the Bloomberg Terminal.