The Aussie Dollar Finds Risk Off After China Posts Poor PMI Data

“The Australian dollar fell, erasing earlier gains, after growth in Chinese manufacturing trailed economists’ estimates, damping trade prospects.

The so-called kiwi touched the highest since August 2011 against its Australian counterpart afterReserve Bank of New Zealand Governor Graeme Wheeler said the smaller nation needs to reduce the budget deficit or face higher interest rates. The bank kept its benchmark borrowing cost at 2.5 percent yesterday.

“Chinese manufacturing data was not a disastrous result but definitely weaker than what the market was looking for,” saidJonathan Cavenagh, a currency strategist at Westpac Banking Corp. (WBC) in Singapore. “It would certainly take the shine off of Aussie dollar.”

Australia’s dollar declined 0.3 percent to $1.0392 at 4:27 p.m. in Sydney, after rising as much as 0.2 percent. The so- called Aussie bought 95.78 yen and touched 95.84, the highest since August 2008. Australia’s currency dropped to NZ$1.2350, the lowest since August 2011, before trading at NZ$1.2352, 0.6 percent below yesterday’s close.

The yield on Australia’s benchmark 10-year bonds rose seven basis points, or 0.07 percentage point, to 3.52 percent. The rate has climbed 20 basis points this week.

The kiwi advanced 0.3 percent to 84.14 U.S. cents from yesterday, when it gained 0.4 percent. The currency reached 77.58 yen, the highest since August 2008, before trading at 77.55, up 0.8 percent from yesterday’s close. Two-year interest- rate swaps in New Zealand rose 2 1/2 basis points to 2.92 percent.

China Manufacturing…”

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“HSBC Holdings Plc (HSBA)’s $7.4 billion sale of its stake in Ping An Insurance (Group) Co. (2318) to Thai billionaire Dhanin Chearavanont was cleared by regulators, ending six weeks of speculation over the deal’s fate.

Dhanin’s Charoen Pokphand Group Co. and HSBC said payment was made in cash after the China Insurance Regulatory Commission approved the sale of 976.1 million Hong Kong-traded shares in the nation’s second-largest insurer. The transfer will take place by Wednesday, HSBC said in its statement….”

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“China last year had the biggest deficit in its financial and capital account since records began in 1982 as the domestic and global economies slowed, spurring outflows of funds.

The $117.3 billion annual gap was the first since 1998 when investors deserted China during the Asian financial crisis and reversed a $221.1 billion surplus in 2011, data released on the State Administration of Foreign Exchange website showed today. The current-account excess rose to $213.8 billion in 2012 from $201.7 billion the previous year.

The deficit may reflect reduced intervention by the central bank to control the exchange rate of the yuan, which strengthened 1 percent against the dollar in 2012, the least in three years. China’s foreign-exchange reserves, the world’s largest, rose the least since 2003 last year, as the economy expanded at the weakest pace since 1999.

“This shows that China’s balance of payments is returning to a normal state,” said Liu Li-Gang, head of Greater China economics at Australia & New Zealand Banking Group Ltd. in Hong Kong. “At the margin this will slow China’s rapid reserve accumulation and reduce the pressures for the yuan to appreciate further.”

The capital and financial account includes flows of funds for mergers and acquisitions, foreign direct investment, purchases and sales of equities and fixed-income securities and the central bank’s reserve account used to buy and sell foreign currencies.

Balancing Payments…”

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“Sharp Corp. (6753), the Japanese TV-maker that has warned about its ability to survive, posted a narrower loss helped by job cuts, asset sales and a weaker yen.

The net loss was 36.7 billion yen ($398 million) in the three months ended Dec. 31, compared with a loss of 174 billion yen a year earlier, according to a statement today. The Osaka- based company was expected to report a 34 billion yen loss, based on the average of three analyst estimates compiled by Bloomberg.

Japan’s

largest maker of liquid-crystal displays has shed staff and sold a stake to Qualcomm Inc. as it restructures amid slowing TV sales and competition from Samsung Electronics Co. Sharp and other Japanese exporters have also benefited from the yen’s about 15 percent plunge since the end of September, which boosts the repatriated value of overseas sales.

“The weaker yen is helping Japanese TV-makers like Sharp improve business,” Keita Wakabayashi, a Mito Securities Co. analyst in Tokyo, said before the announcement. “Demand hasn’t yet shown any significant recovery.”

The company reiterated that it expects an annual loss of 450 billion yen, its second straight unprofitable year. Sony Corp. andPanasonic Corp. (6752), Japan’s two biggest TV-makers, have also announced turnaround plans because of losses from producing televisions.

Sharp made an operating profit, or sales minus the cost of goods sold and administrative expenses, of 2.6 billion yen in the three months ended Dec. 31. It had an operating loss of 24 billion yen a year earlier. Third-quarter sales totaled 678.2 billion yen.

Job Cuts…”

“Daimler AG (DAI), the third-biggest maker of luxury cars, agreed to buy a stake in the car unit of Chinese partner Beijing Automotive Group Co. to spur efforts to catch up with competitors in the world’s largest auto market.

The parent of Mercedes-Benz will acquire 12 percent of the car division of the Chinese company, known as BAIC Motor, the Stuttgart, Germany-based manufacturer said today in a statement. The Beijing-based partner will grant Daimler two seats on the unit’s board of directors.

The investment is “significant, so that both companies can actively participate in the opportunities of the Chinese automotive market,” Daimler Chief Executive Officer Dieter Zetsche, who is also head of the Mercedes car business, said in the statement.

Zetsche has vowed to retake the top spot in worldwide luxury-vehicle sales by the end of the decade after Mercedes fell behind Bayerische Motoren Werke AG in 2005. Volkswagen AG (VOW)’s Audi unit, which has ranked second globally since 2011, also has a target of taking the luxury lead by 2020. China plays a key role in Zetsche’s strategy after Mercedes lagged behind BMW and Audi in sales growth in the country last year.

“It’s a long-term investment which secures Daimler an exclusive access to the partner,” said Christoph Stuermer, a Frankfurt-based analyst with research company IHS. The board seats will allow Daimler to have a say at the partner and start negotiating projects at an early stage, he said.

European Market…”

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“The yen depreciated to its weakest in 2 1/2 years against the dollar and euro amid speculation Prime Minister Shinzo Abe will select a new Bank of Japan (8301) governor who will boost monetary stimulus.

Japan’s currency extended its 12th weekly drop against the dollar as a report showed the jobless rate rose and household spending fell. The euro climbed against the greenback as a report showed manufacturing in the 17-nation region contracted less than estimated in January. The krona reached its strongest level in five months as Sweden’s manufacturing improved in December. The Dollar Index fell as stocks advanced before a report economists said will show U.S. employers added more workers.

Speculation about a new Bank of Japan governor “is the number-one source of the move we have seen in the yen,” said Peter Frank, global head of foreign-exchange strategy inLondon at Banco Bilbao Vizcaya Argentaria SA. (BBVA)“Because you are having that at the same time as strong equities, strong risk-on news flow generally, the yen is doubly weak.”

The yen sank 0.5 percent to 92.13 per dollar at 10:42 a.m. London time, after earlier touching 92.30, the weakest since June 2010. It slid 1.1 percent to 125.94 per euro, after being as low as 126.16, the least since April 2010.

The euro gained 0.7 percent to $1.3668, after being as strong as $1.3675, the most since Nov. 14, 2011. Yesterday it completed the longest stretch of monthly advances against the dollar since May 2003.

Inflation Target…”

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