Aussie Retreats From Eight-Month High as China Concerns Revive

  • China data released over weekend were short of estimates
  • Speculators raised bullish Aussie bets seven straight weeks

Australia’s dollar retreated from an eight-month high versus the greenback as fresh signs of a slowdown in China tempered the enthusiasm for higher-yielding assets that has spurred a rally in global equities.

The Aussie suffered its second decline in three days after reports on Saturday showed lower-than-forecast retail sales and industrial production in China, the South Pacific nation’s largest export market. Futures for iron ore -- Australia’s biggest export -- fell, reversing earlier gains, amid concern a recent rally in the steelmaking material was becoming overstretched.

“This is a smoke and mirrors rally” in the Australian dollar, said Annette Beacher, head of Asia-Pacific research at TD Securities in Singapore. “The Aussie is merely following iron ore, and the underlying fundamentals have not changed. The short-squeeze in iron ore will fade, and then so will the Aussie.”

Australia’s dollar weakened 0.3 percent to 75.42 U.S. cents as of 6:54 a.m. in New York, after touching 75.94 cents, the highest since July. It has rallied 5.6 percent this month, the best performance among Group-of-10 currencies. Beacher said the Aussie may fall to 73 cents within a month.

China Data

China’s industrial output rose 5.4 percent from a year earlier in January and February, the National Bureau of Statistics said March 12, compared with the 5.6 percent median estimate of economists surveyed by Bloomberg. Retail sales climbed 10.2 percent from a year earlier, missing the 11 percent projected gain in a separate survey.

Hedge funds and other large speculators have increased bets on Australia’s currency for seven straight weeks -- matching the longest run since 1994 -- as speculation waned that the Reserve Bank of Australia will cut interest rates. Options markets indicate traders have pared bets on an RBA rate cut by its August meeting to less than 50 percent, from 73 percent at the start of this month.

Speculators raised bullish Aussie bets to a net 29,195 contracts in the week to March 8, the highest level since the period ended Sept. 9, 2014, according to the latest data available from the Commodity Futures Trading Commission.

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