Monday, 4 July 2011 at 11:35, Bloomberg
Australia’s dollar dropped to $1.0742 as of 4:35 pm in Sydney. (REUTERS)
The Australian dollar declined from an seven-week high against the US currency after government reports showed retail sales and building approvals slid in May, damping demand for the nation’s assets.
The so-called Aussie slid the most in a week against New Zealand’s dollar after a gauge of Australia’s annual inflation slid below the top of the central bank’s target range for the first time in 11 months. Reserve Bank of Australia policy makers will leave interest rates unchanged tomorrow, according to economists surveyed by Bloomberg News.
“The reports reflect the weak spots in the economy and add to our view that the RBA will delay any rate hike till later this year,” said Besa Deda, chief economist at St. George Bank Ltd in Sydney. “Retail sales is one of the critical economic releases and will add to the story that the economy is going through a soft patch, so you might see the Australian dollar sell off further.”
Australia’s dollar dropped to $1.0742 as of 4:35 pm in Sydney from $1.0770 in New York on July 1, when it climbed to $1.0790, the strongest since May 11. The currency declined 0.4 per cent to 86.75 yen, and fell 0.5 per cent to NZ$1.2942, the biggest drop since June 22.
New Zealand’s dollar appreciated 0.3 per cent to 82.96 US cents, and traded at ¥66.99 from ¥66.87.
Australian retail sales dropped 0.6 per cent from the prior month, the Bureau of Statistics said, compared with a forecast for an 0.3 per cent increase in a Bloomberg survey. Home-building approvals fell 7.9 per cent, a separate statistics bureau report showed. Consumer prices rose 2.9 per cent in the 12 months through June after a 3.3 per cent gain for May, according to an index compiled by TD Securities Inc. and the Melbourne Institute.
“As far as the RBA is concerned there is clearly nothing here that would suggest any ‘urgency’ is required on the monetary policy front,” Adam Boyton, chief economist for Australia at Deutsche Bank AG in Sydney, wrote in a research note to clients.
Futures traders reduced bets last week that the Australian dollar will gain against the US currency, figures from the Washington-based Commodity Futures Trading Commission show.
The difference in the number of wagers by hedge funds and other large speculators on an advance in the Aussie compared with those on a drop - so-called net longs - was 46,897 on June 28, the least since January 25.
Australia’s dollar isn’t attractive after the currency climbed more against the greenback than any major counterpart in the past year, BlackRock Inc. said.
“You need to have a very strong bullish view of the global economy to want to stay in Aussie longs,” Stephen Miller, a managing director in Sydney at BlackRock, which oversees $3.7 trillion globally, said on July 1. “My view isn’t optimistic enough for me to want to get involved in the Aussie dollar.”
Gains in New Zealand’s dollar were tempered after an industry report showed the value of the country’s commodity exports fell in June for the first time in 10 months. The nation is relying on exports, which make up 30 per cent of gross domestic product, to buoy the economic recovery.
The ANZ Commodity Price Index slipped 1.2 per cent from May, when it increased 0.4 per cent, ANZ National bank Ltd said. After adjusting for currency movements, prices fell 3.3 per cent.
“The lift in the value of the New Zealand dollar compounded the drop in commodity prices,” ANZ National economist Steve Edwards said in the report.
Australian government bonds rose for the first time in five days. The 10-year yield fell six basis points to 5.22 per cent, according to data compiled by Bloomberg.
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