WSJ:Australian Dollar Down Late On Global Economic Jitters
Rates At 0610 GMT
Latest Change
AUD/USD 1.0388 -1.54%
AUD/JPY 79.115 -1.71%
6.50% May, 2013 3.5378% -0.1029
4.50% April, 2020 4.1446% -0.1352
10-Yr Spread To U.S. +230 bps -1 bps
SFE Sep 3-Year Futures 96.44 +0.13
SFE Sep 10-Year Futures 95.775 +0.135
SYDNEY (Dow Jones)--The Australian dollar tumbled Friday amid a mix of concerning U.S. economic data and escalating worries about European banks' access to funding.
Coupled together, the developments weighed on all risk-sensitive assets like the Australian dollar, and fueled another run higher on both ends of Australia's bond curve.
The move in Asia came in the wake of a more than 400 point decline for the Dow Jones Industrial Average on Thursday, with Asian shares sharply lower Friday on the renewed concerns about the global economy. Among the weak U.S. economic reports was data on sales of previously owned homes, a regional manufacturing survey and weekly unemployment claims, which all came in below expectations.
At 0610 GMT, the Australian dollar was at US$1.0338, down from US$1.0500 late Thursday. Against the Japanese yen, the Australian dollar was at Y79.115, down from Y80.49.
Despite the decline, Michael McCarthy, chief market strategist at CMC Markets, said he expects the Australian dollar to bounce back next week.
"I would expect the Aussie back to the US$1.05 to US$1.08 range fairly soon, which is more about the U.S. dollar after a repatriation of funds back to safety in the U.S. ends," said McCarthy.
As for Australian fixed income, both long-end and short-end government bonds continued to benefit from the global rush to safety. As the government's debt gets touted as a new safe-haven asset, the three-year and 10-year bond futures contracts have both added more than 60 basis points since the end of the second quarter.
Among the few government entities locally not benefiting from the push is coal-rich Queensland, even though it accounts for around 25% of the national economy. Hurting Queensland is that it's the only Australian state not rated triple-A, while it continues to recover following a series of devastating floods earlier this year.
"The simple fact is that a return to surplus is more a five-, six- or seven-year proposition for them," said Michael Turner, a fixed income strategist with RBC Capital Markets in Sydney.
-By Geoffrey Rogow, Dow Jones Newswires; +61-2-8272-4686; geoffrey.rogow@dowjones.com
