“Australia’s dollar slid to the lowest in almost three years after a gauge of Chinese manufacturing contracted and the Federal Reserve signaled an exit from monetary easing. New Zealand’s bond yields surged the most since the collapse of Lehman Brothers Holdings Inc.
The Aussie slid for a fifth day, following the biggest decline since November 2011 yesterday, after Fed Chairman Ben S. Bernanke signaled the central bank could reduce monetary stimulus that tends to weaken the greenback. New Zealand’s dollar dropped for a fifth day after data showed the nation’s economic growth slowed more than economists forecast.
“The link between the China growth story and the Aussie dollar remains crucial,” said Michael Judge, a Sydney-based dealer at OZForex Pty Ltd., an online foreign-exchange company. “We all know the only way interest rates are heading in this country at the moment is south, and obviously weakening China growth doesn’t help that prognosis.”
The Australian dollar fell 0.7 percent to 92.29 U.S. cents as of 4:55 p.m. in Sydney from yesterday, when it tumbled 2 percent. It earlier touched 92.25, the lowest since Sept. 10, 2010. The New Zealand dollar weakened 0.8 percent to 78.33 U.S. cents after sliding 1.1 percent yesterday.
The yield on Australia’s benchmark 10-year government bond rose as much as 23 basis points to 3.65 percent, the highest since March 15. The extra yield it offers over 10-year U.S. debt yesterday narrowed to 107 basis points, or 1.07 percentage point, the least since November 2008. Commonwealth Bank of Australia (CBA) predicts the gap could shrink to the lowest since 2001.