Photographer: Ian Waldie/Bloomberg

Aussie Declines as Trade Surplus Misses Estimates, Exports Hit

  • Yen weakens after final 1Q gross domestic product misses est.
  • Japan sells record amount of U.S. sovereign debt in April

The Australian dollar extended initial losses after April trade surplus missed even the worst estimate, disappointing market participants.

Yen weakened after official data showed Japan’s economy grew slower than earlier projected in the first quarter and Japanese investors had sold a record amount of U.S. sovereign debt in April. Australia’s April trade balance shrunk to a surplus of A$555 million, missing the median estimate of A$2b and down from A$3.2b in March.

"The hit to Australia’s coal exports caused by Cyclone Debbie almost single-handedly wiped out the international trade surplus in April," according to Paul Dales, Chief Australia & New Zealand economist at Capital Economics Ltd. "Coal exports have bounced back in May and the trade surplus will rebound back above $3bn that month. As such, net exports may not even be a drag on GDP growth in the second quarter."

The yen remained offered in a tight range that saw option-related selling of dollars near 110 strikes, according to a trader who asked not to be identified as he isn’t authorized to speak publicly. The U.S. dollar was supported against most of its Group-of-10 peers as Treasury yields rose cross the curve.

  • AUD/USD down 0.2% to 0.7531
  • Macro selling of AUD/USD seen overnight remains layered between 0.7560/80, according to an Asia-based FX trader not authorized to speak to the media
    • Downside option-related bids adjacent to 0.7500 and 0.7480 strikes expiring June 8
  • USD/JPY up 0.1% to 109.90 versus 109.73-110.01 range
    • 1Q GDP expanded an annualized 1% vs preliminary reading of 2.2% and economists’ forecast of +2.4%
  • Japanese investors sold a net 3.66 trillion yen ($33.3 billion) of U.S. sovereign bonds in April, the biggest on record since at least 2005 after having bought a net 1.04 trillion yen of the debt a month earlier 
    • March’s net monthly purchase had been the first since October 2016
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