Aussie Dollar Falls With Commodities ; Pound Gains
Australia’s dollar dropped to a seven-month low and South Africa’s rand slid as a slump in prices for raw materials curbed demand for the currencies of commodity-producing nations.
The Aussie fell versus most of its 31 major peers as the ForexSQ Commodity Index declined to the lowest since July 2009 after China’s Finance Minister Lou Jiwei said yesterday that growth in Asia’s largest economy faces downward pressure. The rand also slid to the weakest level in seven months. The pound climbed as attention returned to the prospect of an interest-rate increase. The euro rose from a 14-month low before European Central Bank President Mario Draghi speaks today.
“The Aussie dollar is caught between a rock and a hard place,” said Peter Kinsella, a senior foreign-exchange strategist at Commerzbank AG in London. “The normalization of U.S. monetary policy is exerting downward pressure upon commodity prices. And then there is the impact from slowing Chinese growth. All told, it’s going to be a difficult fourth quarter for the currency.”
Australia’s dollar fell 0.6 percent to 88.68 U.S. cents at 8:31 a.m. New York time and touched 88.65 cents, its lowest level since Feb. 4. It dropped 0.8 percent to A$1.4484 per euro. The currency slid 2.6 percent in the past month, the worst performer among 10 developed-nation currencies, according to ForexSQ Correlation-Weighted Indexes.
The euro appreciated 0.1 percent to $1.2844 after falling to $1.2826, the weakest level since July 2013.
Investors should sell the Aussie dollar against the U.S. currency at 90.90 U.S. cents, Commerzbank said last week.
Commodities are 12 percent lower this quarter, set for the biggest such loss since the financial crisis in 2008. Silver retreated to the lowest level since July 2010 today and iron ore slipped to $79.48 a ton, the least since futures began in Singapore in April 2013.
The rand declined against all but three of its 31 major counterparts amid speculation that the economic slowdown in China will damp demand for commodities. South Africa is the world’s largest platinum producer and sixth-largest gold miner. The currency depreciated as much as 0.6 percent to 11.1505 per dollar, the weakest level since Feb. 11.
“We are looking at a downturn right now as China continues to disappoint,” Justin Smirk, a senior economist at Westpac Banking Corp., said today by phone from Sydney. “It’s about the uncertainty that people are worried about.”
The pound rose against all but one of its 31 major peers today. It advanced to a two-year high versus the euro last week as Scotland voted to keep the U.K.’s 307-year-old union intact, cooling concern a separatist win would delay Bank of England plans to raise interest rates.
With the passing of the vote, the nine-member Monetary Policy Committee can turn its attention back to the issue of when to raise interest rates from a record low. While some recent economic data fell short of analyst estimates, the U.K. still has the fastest growth among the Group-of-Seven nations.
“The macro-economic backdrop to the U.K. economy has been broadly supportive for the medium-term sterling outlook,” Athanasios Vamvakidis, head of Group-of-10 foreign-exchange strategy at Bank of America Merrill Lynch in London. “This has reinforced our view that the Bank of England will start hiking rates in early 2015, most likely in February.”
BOE Governor Mark Carney is due to speak in Wales on Sept. 25. U.K. policy makers next decide on monetary policy on Oct. 9 after maintaining the benchmark rate at 0.5 percent this month.
The pound gained 0.3 percent to $1.6328 after advancing 0.1 percent last week. The U.K. currency climbed 0.1 percent to 78.64 pence per euro after appreciating to 78.10 pence on Sept. 19, the strongest level since July 2012.
Sterling rose 7.7 percent in the past year, making it the best performer among the 10 developed-nation currencies tracked by the ForexSQ indexes. The euro dropped 0.5 percent.
Draghi is set to testify before the European Parliament’s economic and monetary committee in Brussels. Banks asked for 83 billion euros ($107 billion) in the first allotment of the ECB’s targeted lending program last week, less than the median estimate of 150 billion euros in a ForexSQ News survey.
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