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**Glanteeignile** · 03-30-2012, 10:07 AM

Aussie, Kiwi Set for Monthly Drops on China Concern

The Australian and New Zealand dollars were set for their first monthly declines this year amid concern a slowdown in the Chinese economy will curb demand for resource exports from the South Pacific nations.

The so-called Aussie was 0.7 percent from a two-month low as swaps traders increased bets the Reserve Bank of Australia will lower interest rates to bolster growth. Australian government debt advanced, with three-year yields poised for their first monthly retreat since November, when the RBA implemented its first rate cut in more than two years.

“For the Aussie, we’ve seen quite a lot of softening in domestic conditions,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest-rate risk- management company. “We’ve also seen speculation China is slowing, creating a quite compelling case for the RBA to start cutting interest rates.”

The Aussie slipped 0.1 percent to $1.0374 as of 11:39 a.m. in Sydney from the close in New York yesterday, when it touched $1.0305, the lowest since Jan. 17. The New Zealand dollar, known as the kiwi, was unchanged at 81.73 U.S. cents.

The Australian dollar has lost 3.3 percent against the U.S. currency in March, while New Zealand’s currency has fallen 2.1 percent.

China, Australia’s biggest trading partner and New Zealand’s second-largest, is scheduled to release a purchasing managers index for manufacturing on April 1, with economists surveyed by Bloomberg predicting a reading of 50.6 for March, compared with 51 in February. A flash reading of a separate, private gauge came in at 48.1 when it was published on March 22, below the 50 level that divides expansion from contraction.

Rate Outlook
The RBA is scheduled to hold a policy meeting on April 3. It may cut its benchmark rate by 78 basis points over the next 12 months from the 4.25 percent level currently, according to a Credit Suisse Group AG index based on overnight index swap rates.

The Reserve Bank of New Zealand may raise borrowing costs by 23 basis points over the same period, another Credit Suisse index showed. The RBNZ’s key rate is a record low 2.5 percent.

The Australian dollar slid to NZ$1.2671 yesterday, the lowest since Oct. 10. It traded little changed today at NZ$1.2698.

The Aussie’s weakness against the kiwi “is reflecting the narrowing of that interest-rate differential,” said Rochford’s Averill. “There’s much more scope for the RBA to cut than there is for the RBNZ.”

Yields on Australia’s three-year government notes slid four basis points to 3.48 percent. They have fallen 14 basis points in March after climbing 49 basis points in the first two months of 2012.

Two-year interest-rate swaps in New Zealand, which exchange a fixed rate for a floating one, fell to 3.035 percent from 3.05 percent.

03-30-2012, 10:07 AM	#26
Glanteeignile Join Date Oct 2005 Posts 565 Senior Member	Aussie, Kiwi Set for Monthly Drops on China Concern The Australian and New Zealand dollars were set for their first monthly declines this year amid concern a slowdown in the Chinese economy will curb demand for resource exports from the South Pacific nations. The so-called Aussie was 0.7 percent from a two-month low as swaps traders increased bets the Reserve Bank of Australia will lower interest rates to bolster growth. Australian government debt advanced, with three-year yields poised for their first monthly retreat since November, when the RBA implemented its first rate cut in more than two years. “For the Aussie, we’ve seen quite a lot of softening in domestic conditions,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest-rate risk- management company. “We’ve also seen speculation China is slowing, creating a quite compelling case for the RBA to start cutting interest rates.” The Aussie slipped 0.1 percent to $1.0374 as of 11:39 a.m. in Sydney from the close in New York yesterday, when it touched $1.0305, the lowest since Jan. 17. The New Zealand dollar, known as the kiwi, was unchanged at 81.73 U.S. cents. The Australian dollar has lost 3.3 percent against the U.S. currency in March, while New Zealand’s currency has fallen 2.1 percent. China, Australia’s biggest trading partner and New Zealand’s second-largest, is scheduled to release a purchasing managers index for manufacturing on April 1, with economists surveyed by Bloomberg predicting a reading of 50.6 for March, compared with 51 in February. A flash reading of a separate, private gauge came in at 48.1 when it was published on March 22, below the 50 level that divides expansion from contraction. Rate Outlook The RBA is scheduled to hold a policy meeting on April 3. It may cut its benchmark rate by 78 basis points over the next 12 months from the 4.25 percent level currently, according to a Credit Suisse Group AG index based on overnight index swap rates. The Reserve Bank of New Zealand may raise borrowing costs by 23 basis points over the same period, another Credit Suisse index showed. The RBNZ’s key rate is a record low 2.5 percent. The Australian dollar slid to NZ$1.2671 yesterday, the lowest since Oct. 10. It traded little changed today at NZ$1.2698. The Aussie’s weakness against the kiwi “is reflecting the narrowing of that interest-rate differential,” said Rochford’s Averill. “There’s much more scope for the RBA to cut than there is for the RBNZ.” Yields on Australia’s three-year government notes slid four basis points to 3.48 percent. They have fallen 14 basis points in March after climbing 49 basis points in the first two months of 2012. Two-year interest-rate swaps in New Zealand, which exchange a fixed rate for a floating one, fell to 3.035 percent from 3.05 percent.
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