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Aussie Pares Biggest Weekly Drop Since August After China PMI - (Bloomberg)

Posted by Chris Advincula on Nov 1, 2013 4:36:00 AM

Australia’s dollar pared declines that have it on course for the biggest weekly loss since August after a Chinese report showed manufacturing strengthened last month at a quicker pace than economists had forecast.

The currency was also supported after data in Australia and South Korea indicated expanding factory output, adding to signs of stabilization of growth in the region. New Zealand’s currency was poised for its first back-to-back weekly losses after the nation’s central bank said yesterday that currency strength will give policy makers flexibility on the timing and size of any rate increases.

“The Chinese data today does help to alleviate concern around rising money-market rates and, along with better Australian and Korean PMI numbers, should give the Australian dollar support,” said Greg Gibbs, a senior currency strategist at Royal Bank of Scotland Group Plc in Singapore. “There’s every chance that the Aussie does find its feet and firms again.”

The Australian currency rose 0.2 percent to 94.78 U.S. cents as of 4:50 p.m. in Sydney, still set for a 1.1 percent weekly drop, the most since the five days ended Aug. 30. It fell 0.2 percent to 92.80 yen and has weakened 0.6 percent since Oct. 25. The kiwi was at 82.60 U.S. cents from 82.63 yesterday, poised for a 0.3 percent weekly decline. It slid 0.5 percent to 80.88 yen.

The official manufacturing Purchasing Managers’ Index (CPMINDX) for China climbed to an 18-month high of 51.4 in October, compared with 51.1 in September, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today. The reading compares with the median estimate of 51.2 in a Bloomberg News survey, with a number above 50 indicating growth.

Fed Speakers

A manufacturing index in Australia climbed to 53.2 last month, the highest since 2010, the Australian Industry Group said in a report today. Measures of production, employment, exports and new orders increased while those for inventories, deliveries and average wages declined.

South Korea’s manufacturing PMI rose to 50.2 in October from 49.7, according to a report from HSBC and Markit Economics.

Residential property prices in Australia’s eight capital cities rose 1.3 percent in October, the RP Data-Rismark Hedonic Home Value Index released today showed. Over 12 months, the index grew at the fastest pace in three years according to the report.

The Aussie rose 1.5 percent in October following a 4.7 percent appreciation in September, while the kiwi slipped 0.5 percent last month after a 7.4 percent gain in September.

Taper Timing

Advances in both currencies were capped as traders speculated on the timing for tapering of Federal Reserve stimulus before speeches today by St. Louis Fed President James Bullard and his counterparts Narayana Kocherlakota and Jeffrey Lacker.

“Comments from Fed speakers today will carry a lot of weight for the U.S. dollar and how it trades in the short term,” said Stan Shamu, a market strategist at IG Ltd. in Melbourne. “The unwind of U.S. dollar shorts might impact risk trades,” with expectations of a trimming of stimulus this year rising slightly, he said.

Australia’s three-year yields rose four basis points, or 0.04 percentage point, to 3.05 percent, while the 10-year rate gained four basis points to 4.06 percent. New Zealand’s two-year swap rate, which is sensitive to benchmark rate expectations, fell two basis points to 3.42 percent.


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