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Aussie Drops Below 90 U.S. Cents on China as Swedish Krona Falls

Australia’s dollar fell below 90 U.S. cents for the first time since March and Sweden’s krona slid after elections, as prospects for U.S. interest-rate increases next year boosted the greenback’s allure.


The Aussie and krona were the worst performers among the 16 major currencies today, while the Bloomberg Dollar Spot Index approached a 14-month high. Australia’s currency extended this month’s decline to 3.7 percent after data showed the weakest growth in Chinese industrial production since the global financial crisis. The krona dropped as Sweden faced the prospect of a hung parliament. The pound was near the lowest in 10 months before Scotland votes on independence this week.

“China’s weak patch is extending a bit longer than expected as seen in the recent industrial production data,” said Imre Speizer, a markets strategist at Westpac Banking Corp. in Auckland. “That should weigh on the Aussie dollar.”

Australia’s currency fell 0.5 percent to 89.93 U.S. cents at 8:31 a.m. in London after dropping to 89.84 cents, the lowest level since March 12. The krona slid 0.5 percent to 7.1544 versus the U.S. currency after depreciating to 7.1571, the least since June 2012.

The U.S. dollar strengthened 0.2 percent to $1.2939 per euro and was little changed at 107.30 yen. The euro sank 0.2 percent to 138.83 yen. Japanese financial markets are shut today for a national holiday.

China Production

Chinese industrial output rose 6.9 percent from a year earlier in August, the statistics bureau said Sept. 13. That was down from 9 percent in July and the slowest pace outside the Lunar New Year holiday period of January and February since December 2008, based on previously reported data compiled by Bloomberg. China is Australia’s largest trading partner.

Before the slide in the Aussie, the median forecast in Bloomberg surveys of analysts for the currency’s end-2014 level had climbed to 92 cents at the beginning of this month. That was the highest projection since July 2013 and the first time in more than a year that the Aussie’s spot level had fallen below the survey estimate.

The krona depreciated as the three-party Social Democratic opposition led byStefan Loefven won 43.7 percent, versus 39.3 percent for the government of Prime Minister Fredrik Reinfeldt, with 99.8 percent of the vote counted. The nation’s political establishment was thrown into turmoil as backing for the anti-immigration Sweden Democrats more than doubled, to 12.9 percent, making them the third-largest party.

The result marks an end to eight years of rule by Reinfeldt’s conservative-led coalition. The premier said he will hand in his resignation today as the responsibility of forming a new government falls to the Social Democrats, which won the most votes.

Dollar Strength

The Bloomberg Dollar Spot Index, which tracks the greenback against 10 leading global currencies, was little changed at 1,050.79 after climbing to 1,051.77 on Sept. 12, the highest since July 2013.

The dollar has risen as signs of a strengthening U.S. economy boosted speculation the Federal Reserve is moving closer to raising interest rates.

Analysts surveyed by Bloomberg predict a New York Fed report today will show manufacturinggrowth in the region accelerated this month. Industrial production data also due today will probably indicate continued gains in August, according to a separate survey.

There’s about an 80 percent chance the Fed will raise its target for overnight lending between banks from a range of zero to 0.25 percent by its September 2015 meeting, fed funds future data compiled by Bloomberg showed on Sept. 12. Policy makers begin a two-day gathering tomorrow.

U.S. Divergence

The foreign-exchange market “has surged back into life courtesy of the evident and still unraveling divergence between the U.S. and a host of other major economies and their monetary policies or political developments,” National Australia Bank Ltd. analysts, including Sydney-based global co-head of currency strategy Ray Attrill, wrote in an e-mailed note to clients today.

The pound stayed lower following a decline last week, before a referendum on Scottish independence on Sept. 18.

No fewer than four polls were released over the weekend, three of which continued to show the “no” campaign ahead. The fourth, a survey by ICM Research for the Sunday Telegraph, put “yes” ahead by the greatest-ever margin, leading by eight percentage points, 54 percent to 46 percent, when excluding undecided voters.

Sterling declined 0.2 percent to $1.6244 after touching $1.6052 on Sept. 10, a level not seen since Nov. 15.

http://www.bloomberg.com/