Aussie Dollar Gains Versus Peers on Chinese Economic Data

Australia’s dollar gained against most of its major counterparts as a leading indicator for China’s economy rose in August, improving trade prospects for the South Pacific nation.
The Australian and New Zealand currencies erased declines after the Conference Board said its leading economic index for China rose 1.7 percent to 240.4 in August from the previous month. Demand for the so-called Aussie and kiwi dollars was limited amid concern disagreement among the euro region’s leaders is curbing prospects for growth.
“Risk aversion eased after the release of the Chinese economic indicator,” buoying riskier assets such as the Australian dollar, said Yuji Saito, director of the foreign exchange department in Tokyo at Credit Agricole SA. (ACA)
Australia’s currency climbed 0.1 percent to $1.0432 as of 2:45 p.m. in Sydney and lost 0.1 percent to 81.12 yen.
New Zealand’s dollar gained 0.1 percent to 82.34 U.S. cents, after sliding as much as 0.2 percent. The currency dropped 0.1 percent to 64.03 yen.
China is Australia’s largest trading partner and New Zealand’s second-biggest export destination.

European Focus

A report tomorrow will probably show a gauge of French consumer confidence fell to 86 in September from 87 last month, according to the median estimate of economists surveyed by Bloomberg News. That would be the lowest since February.
Economists estimate an index of French business confidence fell to 89 this month from 90 in August. The national statistics office releases the data today.
“Markets are still cautious. Europe is still going to be the key event this week,” said Alvin Pontoh, a Singapore-based strategist at TD Securities Inc.
The Aussie has weakened 1.5 percent in the past month, the second-worst performance among 10 currencies tracked by Bloomberg Correlation-Weighted Indexes. New Zealand’s currency was little changed over the same period.
“The Australian dollar is looking softer,” said Kumiko Gervaise, an analyst at Gaitame.com Research Institute Ltd. in Tokyo. “It looks as though the unstable situation in Europe could last for some time.”
Australian bonds advanced before the central bank’s policy board meets on Oct. 2. The yield on the benchmark 10-year note fell 3 basis points, or 0.03 percentage point, to 3.2 percent. Reserve Bank of Australia Assistant Governor Guy Debelle is scheduled to speak in Melbourne at 6:30 p.m. local time today.

RBA Meeting

“If we see another significant move up in the Aussie dollar to $1.06-$1.07, I think the RBA could lean against cutting rates to bring the currency down,” TD’s Pontoh said.
Swaps indicate an 83 percent chance policy makers will cut the overnight cash-rate target to 3.25 percent from 3.5 percent when they meet Oct. 2, according to data compiled by Bloomberg.
The RBA said Australian households are building a financial cushion by repaying mortgages faster and saving more, while businesses are indicating renewed willingness to borrow.
“Given the large share of households with mortgage prepayment buffers, along with relatively low unemployment and moderate income growth, most households appear well placed to meet their debt obligations,” the central bank said in its semiannual financial stability review released in Sydney today.

Source: Bloomberg