The Australian dollar traded 0.4 percent from a three-month low before a report forecast to show the nation’s trade deficit widened while U.S. data due today is predicted to add to evidence of an acceleration in growth there.
The Aussie dropped below 90 U.S. cents yesterday for the first time since September as prospects of a trimming of Federal Reserve stimulus in coming months damped demand for the South Pacific nation’s assets. Growth in Australia was weaker than forecast last quarter, according to a report yesterday. New Zealand’s dollar touched its strongest in five years versus Australia’s as the smaller nation’s two-year swap rate reached the highest level since February 2011.
“There are still so many Aussie shorts in the market not just against the dollar but also against the kiwi and pound,” said Kara Ordway, a currency strategist at City Index Group Ltd. in Sydney. “The Aussie is a risk currency and it’s taken the brunt of the U.S. dollar move higher, but on top of that, there’s the domestic story, which is very weak.” A short position is a bet an asset will decline in value.