The Australian dollar fell on concern Europe’s leaders won’t reach a resolution to the region’s debt crisis at an Oct. 23 summit. Demand for the so-called Aussie was hampered as Asian stocks declined on concern that a Franco-German split over a European bailout fund will hamper progress, sapping demand for higher-yielding assets. The Australian and New Zealand currencies rose earlier on speculation U.S. reports today will show initial jobless claims fell and manufacturing in the Philadelphia region improved. “The chance for the European summit this weekend to be a positive surprise for the markets is decreasing,” said Junya Tanase, chief currency strategist at JPMorgan in Tokyo. “The bias is for the markets to lean toward a risk-off mood again after the meeting because of concern over the debt crisis,” which is negative for high-yielding currencies such as the Aussie and New Zealand dollar, he said. The Australian dollar slid 0.4 percent to $1.0185 as of 3:48 p.m. in Sydney. The Aussie dropped 0.5 percent to 78.14 yen. New Zealand’s currency, nicknamed the kiwi, weakened 0.2 percent to 78.99 U.S. cents, and fell 0.3 percent to 60.60 yen. The MSCI Asia Pacific Index of shares lost 1.7 percent. French President Nicolas Sarkozy and German Chancellor Angela Merkel convened yesterday in Frankfurt aiming to narrow divisions on the role of the European Central Bank in leveraging the euro bailout fund. While Merkel sought this week to lower expectations that the crisis-fighting effort would climax at the summit in Brussels, Group of 20 finance chiefs last week set the meeting as a deadline for action. U.S. Data Losses in the Aussie were limited ahead of U.S. data that may point to a recovery in the world’s largest economy and after a Reserve Bank of Australia official said that the nation’s banks are relatively less at risk from the sovereign debt crisis. Applications for U.S. unemployment insurance payments decreased 4,000 in the week ended Oct. 15 to 400,000, Labor Department figures will probably show today, according to the median estimate of economists in a Bloomberg News survey. The Federal Reserve Bank of Philadelphia’s general economic index improved to minus 9.6 in October from minus 17.5 last month, another poll showed ahead of today’s data. Readings less than zero signal contraction in the area covering eastern Pennsylvania, southern New Jersey and Delaware. Not as Bad “The U.S. economy doesn’t look as bad as we had thought,” supporting the Aussie and kiwi, said Kengo Suzuki, manager of the foreign-bond department in Tokyo at Mizuho Securities Co., a unit of Japan’s third-biggest listed bank. Australia’s banks have limited holdings of sovereign debt in countries most at risk in Europe, without being “entirely immune” from the turmoil, RBA Assistant Governor Malcolm Edey said. “Australian banks have only limited direct exposures to sovereign debt in the countries that are most at risk,” Edey said in prepared remarks for a speech in Sydney today. “So potential effects on Australian banks’ overall asset quality are not an issue.” Australia’s benchmark 10-year bond yield slid half a basis point, or 0.05 percentage point, to 4.47 percent. The Australian Office of Financial Management announced a new syndicated 4.75 percent April 2027 Treasury Bond, the longest-maturity government debt, has been priced at a yield to maturity of 4.88 percent, according to an e-mailed statement today. The issue size is A$3.25 billion ($3.3 billion) in face value terms, AOFM said. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates which is sensitive to interest-rate expectations, gained one basis point to 3.17 percent. To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

Source