Australian, New Zealand Currencies Gain After China Manufacturing Report

By Masaki Kondo and Mariko Ishikawa - Aug 23, 2011 2:26 PM GMT+0700

The Australian and New Zealand dollars appreciated versus most of their major peers after a private report showed China’s manufacturing shrank at a slower pace this month, easing concern that the global economy is losing momentum.

The so-called Aussie gained for a third day against the U.S. currency as Asian stocks climbed, supporting demand for higher-yielding assets. The New Zealand dollar rose after a central bank report showed corporate executives’ outlook for economic growth even as their expectations for inflation have fallen.

“The data flow across the globe has been quite weak recently, so even a secondary indicator like this that comes out stronger than expected can have some impact” on the Australian and New Zealand dollars, Todd Elmer, head of Group-of-10 currency strategy for Asia ex-Japan at Citigroup Inc. in Singapore, said of the China manufacturing report.

Australia’s dollar advanced to $1.0486 as of 5:23 p.m. in Sydney from $1.0409 in New York yesterday, after falling as low as $1.0387. It bought 80.45 yen from 79.93 yen. New Zealand’s currency traded at 83.20 U.S. cents from 82.42 and rose to 63.83 yen from 63.29 yen.

The MSCI Asia Pacific Index of regional shares jumped 1.9 percent, set for its first advance in four days.

China Manufacturing

A preliminary gauge of China manufacturing in August was 49.8, according to a reading of the Purchasing Managers’ Index reported by HSBC Holdings Plc and Markit Economics today. That compares with a final reading for July of 49.3. A number below 50 indicates contraction.

“By the June meeting, signs were emerging that economic growth in many developed economies had lost some momentum,” Ric Battellino, Reserve Bank of Australia’s deputy governor, said today according to the text of a speech. “Growth in China and most other parts of Asia, however, remained a bright spot.”

New Zealand company executives see inflation averaging 2.9 percent in a year’s time, compared with a prior estimate of 3.1 percent, a quarterly report from the Reserve Bank of New Zealand showed today. Gross domestic product is projected to grow 2.9 percent in one year, up from 2.1 percent in the previous survey.

“Though inflation expectations are weaker, GDP outlook actually rises, so this isn’t a selling catalyst for the kiwi,” said Takuya Kawabata, a researcher in Tokyo at Gaitame.com Research Institute Ltd., a unit of Japan’s largest foreign- exchange margin company. “The bias for the Reserve Bank’s move is an increase rather than a cut in interest rates.”

The one-year overnight-index swap rate, an indication of what traders expect the central bank’s key interest rate will average during the period, was at 2.8 percent today, compared with the official cash rate of 2.5 percent.

To contact the reporters on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.