Australian Dollar Rebounds From One-Year Low Before Trade Data

By Chris Young

Sept. 4 (Bloomberg) -- The Australian dollar rebounded from the lowest in a year on speculation its 13 percent slump this quarter has been excessive given the yield advantage investors can still earn for holding the nation's bonds.

The Australian dollar also gained before a government report that economists say will show exports exceeded imports in July for a second month, the first back-to-back monthly trade surplus since 2001. The currency advanced for the first time in five days on speculation traders are likely to pare bets on how much the Reserve Bank of Australia will cut interest rates, said Joshua Williamson, a senior strategist at TD Securities Ltd.

``When currency traders look at the fundamentals of the Australian dollar they'll see growth will be sustained and the RBA won't cut rates by as much as expected,'' Sydney-based Williamson said. ``The Australian dollar is well oversold. Yield won't be a drag on the currency.''

The Australian dollar bought 83.55 U.S. cents at 9:50 a.m. in Sydney, compared with 82.96 cents in late Asian trading yesterday when it touched 82.34, the lowest level since Sept. 11. It will gain to 85 to 86 cents in coming weeks, Williamson said.

The Reserve Bank cut the overnight cash-rate target by a quarter-percentage point to 7 percent on Sept. 2, its first reduction in seven years. Policy makers will lower the rate by almost 1 percentage point in 12 months, according to a Credit Suisse Group index based on the trading of interest-rate swaps.

The trade surplus was A$50 million ($41.8 million) in July compared with A$411 million in June, according to the median estimate of economists surveyed by Bloomberg News before the Bureau of Statistics releases the report at 11:30 a.m. in Sydney.

Australian 10-year government bonds yield 2.03 percentage points more than similar-maturity U.S. Treasury notes compared with 1.95 percentage points at the end of last week.

Benchmark 10-year bonds declined for a second day. The yield on the 5.25 percent note due March 2019 rose 3 basis points, or 0.03 percentage point, to 5.73 percent, according to data compiled by Bloomberg. The price fell 0.25, or A$2.50 per A$1,000 face amount, to 96.287.

To contact the reporter on this story: Chris Young in Sydney at cyoung12@bloomberg.net.