Aussie drops after longest rally since 2009

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(Bloomberg) -- The Australian dollar fell, halting the longest rally in more than six years, as Chinese trade data added to concern the world’s second-largest economy is slowing.

The Aussie weakened for the the first time in 10 days versus the greenback as an commonly used gauge of momentum signaled the currency’s rally was the most vulnerable to reversal at any time in the past 18 months. New Zealand’s dollar dropped for the first time in 11 days. China is the major trading partner for both Australia and New Zealand.

“It’s squarely on the Chinese report,” Neil Jones, London- based head of hedge-fund sales at Mizuho Bank Ltd. “There is a strong correlation there and some of the shine has come off the commodities themselves. It’s across the board as far as commodity-based currencies” being hurt.

Australia’s dollar tumbled 1.1 percent to 72.85 U.S. cents as of 7:43 a.m. New York time, after strengthening 5.4 percent during the previous nine days in the longest winning streak since March 2009. New Zealand’s currency dropped 0.5 percent to 66.82 U.S. cents after surging 6.2 percent since Sept. 28 through Monday.

China’s custom’s administration said imports slumped for an 11th month in September, sliding 17.7 percent in yuan terms from a year earlier. Exports fell 1.1 percent, compared with a 6.1 percent decline the previous month.

‘Underlying Trend’

The Aussie had surged in the previous nine days to reach 73.82 U.S. cents on Monday as traders pushed back forecasts for when the Federal Reserve will raise interest rates, boosting demand for higher-yielding assets.

“The more markets rally, the greater the likelihood that the Fed considers again raising rates: that makes me cautious still about the Australian dollar’s underlying trend,” said Mansoor Mohi-uddin, a senior markets strategist at Royal Bank of Scotland Group Plc in Singapore. “China’s domestic data releases may also remind investors about risks from the world’s second- largest economy continuing to slow.”

The Australian dollar’s 14-day relative-strength index climbed to 71 on Monday, above the level of 70 that some traders see as a signal it has risen too far, too fast. The last time it was above that level was in April 2014.

The Australian and New Zealand dollars were also weighed down by a drop in crude oil futures below $50 per barrel, said Satoshi Okagawa, global market analyst at Sumitomo Mitsui Banking Corp. in Singapore. The two currencies were unlikely to extend the recent gains as demand for commodities remains subdued in China and other emerging economies, he said.
 

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