WSJ:Australian Dollar Down Late, NZ Rating Cut Hurts
Rates At 0630 GMT
Latest Change
AUD/USD 0.9750 -0.51%
AUD/JPY 74.743 -0.53%
6.50% May, 2013 3.6783% -0.0073
4.50% Mar, 2020 4.1745% -0.0283
10-Yr Spread To U.S. +227 bps -4 bps
SFE Dec 3-Year Futures 96.39 +0.02
SFE Dec 10-Year Futures 95.76 +0.04
SYDNEY (Dow Jones)--The Australian dollar slipped Friday, hurt partly by a credit ratings downgrade for neighbor New Zealand.
After keeping markets at ransom for much of the past few weeks, the euro zone offered little development Friday in the wake of Germany approving an expansion to the European Financial Stability Fund. For now, leaders in the currency bloc are discussing the next step in bailing out debt-torn Greece.
For the local currency, a sharp, early morning drop came at the hands of Standard & Poor's and Fitch Ratings, which both cut New Zealand's foreign-currency ratings one notch to AA from AA-plus, citing the country's high external debt and pressures created from recovery efforts following the Christchurch earthquakes. From there, the currency was further hit by a weak reading on Australian home prices, which fell again in August, as well as on private-sector credit.
Even with the weak readings and continued uncertainty in Europe, however, strategists forecast the Reserve Bank of Australia to hold interest rates steady at its Tuesday meeting--the local market's key event next week.
"Today's data were weak, but not surprising," said TD Securities Senior Strategist Roland Randall. "It is clear that financial conditions are tight, probably tighter than 'moderately restrictive' interest rates alone suggest...however, recent commentary from RBA staff and board members don't suggest that the bank is likely to cut interest rates any time soon."
At 0630 GMT, the Australian dollar was at US$0.9750, down from US$0.9800 late Thursday, and at Y74.743, down from Y75.143.
Traders forecast that much of the market's whippy and choppy activity seen in recent weeks will continue for the Australian dollar in both Europe and U.S. trade. NAB Foreign Exchange Strategist Emma Lawson attributed part of that expectation to the volatility around month-end and quarter-end trading.
In the bond market, much of the focus was on the release of the Australian government final budget outcome for the year ended June 30, 2011, where revenue came in A$2 billion less than expected. In addition, the government said it expects weaker revenue due to the ongoing shakeout of global markets, but stuck by a pledge to return a balanced budget in the 2012-13 fiscal year.
-By Geoffrey Rogow, Dow Jones Newswires; +61-2-8272-4686; geoffrey.rogow@dowjones.com
