Australian Dollar Little Changed on Ore; N.Z. Dollar Falls

By Ron Harui and Tracy Withers

June 24 (Bloomberg) -- Australia's dollar was little changed as Rio Tinto Group said China agreed to pay a record price for iron ore, the nation's largest export. The New Zealand dollar fell before a report on economic growth.

The Australian currency headed for a second quarterly gain as Rio said Baosteel Group Corp., China's biggest steelmaker, will pay 80 percent more for ore. That could bolster Australia's overseas earnings and support the nation's economic expansion. The New Zealand currency was poised to snap a two-quarter winning stretch as a government report this week is forecast by economists to show the economy contracted.

``News that Rio Tinto had achieved an average 85 percent increase in iron ore contract prices helped the Australian dollar gain,'' said John Kyriakopoulos, a currency strategist at National Australia Bank Ltd. in Sydney, in a client note today. ``Traders believe the boost from commodity prices could see economic growth re-accelerate in the second half of the year.''

The Australian dollar traded at 95.17 U.S. cents at 11:07 a.m. in Sydney from 95.14 cents late in Asia yesterday. It has risen 4.2 percent this quarter and 8.7 percent this year. The currency advanced to 102.71 yen from 102.49 yen.

The New Zealand dollar fell to 75.73 U.S. cents from 75.84 cents late in Asia yesterday. It has lost 3.6 percent this quarter and 1.1 percent this year. The currency traded at 81.79 yen from 81.69 yen.

Commodity Exports

China's Baosteel will pay $144.66 a dry metric ton for so- called Pilbara blend fines in the year that began April 1, Rio said yesterday in a statement. The contract marks the first time Chinese buyers agreed to pay more for Australian ore than supplies from Brazil, which are costlier to ship.

The Australian Bureau of Agricultural and Resource Economics said yesterday commodity exports may rise to a record A$212 billion ($202 billion) in the year ending June 30, 2009. That compares with its March forecast of A$189 billion and estimated 2008 sales of A$151 billion. Exports of raw materials contribute 17 percent to Australia's economy.

The New Zealand dollar was set for a monthly decline on concern that slowing economic growth may spur Reserve Bank of New Zealand Governor Alan Bollard to lower interest rates.

``Market pricing for a Reserve Bank easing sticks out like a sore thumb against a backdrop of expected rate hikes elsewhere,'' said Michael Gordon, a currency strategist at Westpac Banking Corp. in Wellington. ``There seems to be little appetite to hold the currency.''

New Zealand's Economy

A government report on June 27 will show the economy contracted 0.3 percent in the first three months of the year, according to the median forecast of 13 economists surveyed by Bloomberg. Seven of the economists said gross domestic product may also shrink in the second quarter, pushing New Zealand into its first recession since 1998.

Bollard said on June 5 it is ``likely'' he will reduce the 8.25 percent benchmark interest rate this year because weak growth is slowing inflation. He forecast the economy will rebound in the second quarter after shrinking in the three months ended March 31.

There is a 28 percent chance of a quarter-point cut next month, according to an index calculated by Credit Suisse Group based on trading in overnight interest-rate swaps.

Australian government debt gained for a second day, pushing the yield on the 10-year security down 1 basis point to 6.53 percent. The price of the 5.25 percent bond maturing in March 2019 rose 0.081, or A$0.81 per A$1,000 face amount, to 90.211. A basis point is 0.01 percentage point.

New Zealand's government bonds were little changed. The yield on the 6 percent note due December 2017 was unchanged from yesterday at 6.44 percent, and the three-year yield held at 6.50 percent. Yields move inversely to prices.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Tracy Withers in Wellington at twithers@bloomberg.net