Aussie advances as business bounce outweighs China trade slump

[TOKYO] The Australian dollar strengthened for a second day as data showing improvement in business conditions outweighed a report showing a slump in China's imports.

The Aussie advanced against all of its 16 major peers, pushing the currency of neighboring New Zealand higher. The kiwi rose from near a six-year low before the central bank meets on Thursday to review monetary policy. Stocks in China, the biggest trading partner for both Australia and New Zealand, swung between gains and losses.

"They're up because of the weakness we've had in the last couple of days and a bit of a relief rally on the back of the better NAB business conditions data and that's just taking kiwi along with it," said Emma Lawson, senior currency strategist at National Australia Bank in Sydney.

"Once the market gets its head around the fact that China's imports were down, then that might actually end up weighing on the currency by the end of the day." Australia's dollar gained 0.4 per cent to 69.54 US cents as of 7 am in London after appreciating 0.2 per cent on Monday. It plunged 3.7 per cent last week. New Zealand's currency rose 0.4 per cent to 62.85 US cents after dropping to 61.30 on Aug 24, the weakest since May 2009. The kiwi lost 2.8 per cent last week.

China's customs administration said exports fell 6.1 per cent in August from a year earlier in yuan terms, compared with a drop of 8.9 per cent in July. Imports slid 14.3 per cent, worse than the decline of 8.6 per cent the previous month.

The Aussie has slumped 14 per cent in the last 12 months, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The kiwi fell 13 per cent, while the US dollar rose 18 per cent.

NAB's report showed a gauge of business conditions improved last month, even as business confidence worsened.

The Reserve Bank of New Zealand will cut its official cash rate by 25 basis points to 2.75 per cent when it meets this week, a Bloomberg survey showed.

The yen climbed 0.1 per cent to 119.15 per dollar and lost 0.2 per cent to 133.51 versus the euro. The common currency gained 0.3 per cent to US$1.1207. European Central Bank President Mario Draghi last week hinted at the possibility of further stimulus as the bank cut its forecasts for growth and inflation.

"Investors have become less responsive to stock-market swings, but markets remain fragile and not ripe for risk taking," said Masafumi Yamamoto, a senior strategist at Monex Inc in Tokyo. "There are fewer currencies that you can buy into."

BLOOMBERG