BLBG:Aussie, N.Z. Dollars Drop, Snapping 4-Day Gains, Before Europe Debt Sales
The Australian and New Zealand dollars snapped four-day gains, as Europe’s bailout fund plans to sell three-year bonds amid concern the region’s biggest economies may lose their top credit ratings.
The so-called Aussie weakened versus most of its 16 major counterparts before Germany, Portugal and France auction bonds today and tomorrow. New Zealand’s currency failed to extend a two-day advance against the yen amid speculation a slowdown in Europe will weigh on growth prospects for the global economy.
“As long as the outlook for the euro area is hazy, I don’t think markets will be totally in a risk-on sentiment,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp., a currency margin company. “The Aussie and kiwi are likely to be sold when the euro is weak.”
Australia’s currency fell 0.3 percent to $1.0349 at 4:42 p.m. in Sydney from the close in New York yesterday, when it completed a four-day gain of 2.8 percent. The Aussie retreated 0.3 percent to 79.39 yen. The New Zealand dollar lost 0.1 percent to 78.88 U.S. cents and dipped 0.1 percent to 60.51 yen.
The European Financial Stability Facility plans to raise 3 billion euros ($3.9 billion) from a sale of three-year bonds to help finance the bailouts of Ireland and Portugal, it said in an e-mailed statement yesterday. The fund is targeting Jan. 5 for the sale, a person with knowledge of the matter said.
Germany will sell 5 billion euros of 10-year notes and Portugal will offer as much as 1 billion euros of 105-day bills today. France plans to auction debt tomorrow maturing in 2021, 2023, 2035 and 2041.
‘Safer Alternative’
Standard & Poor’s said last month it may lower the credit grades of 15 euro nations, including Germany, France and Portugal. The EFSF may lose its top credit rating if any of the bailout fund’s six guarantors face a downgrade from AAA, S&P said separately in December.
Australia’s dollar was 0.2 percent from a record high against the euro amid speculation the currency is attracting investors away from European assets.
“The Aussie will not suffer as much this year on risk sell-offs as it’s moving away from being a high-yield risk play to becoming a safer alternative to Europe,” said Jesper Bargmann, regional head of spot trading for major currencies in Singapore at Royal Bank of Scotland Plc. He prefers to hold the Australian dollar against the euro, he said.
The Aussie bought 79.43 euro cents after touching an all- time high of 79.56 yesterday.
Higher Yields
Demand for the Australian and New Zealand dollars was also supported as Asian stocks extended a global rally, increasing the allure of higher-yielding assets.
The MSCI Asia Pacific Index (MXAP) of shares rose 1.1 percent. The Standard & Poor’s 500 Index and the Stoxx Europe 600 Index both advanced 1.6 percent yesterday.
Yields (GACGB10) on Australia’s benchmark 10-year government bonds fell three basis points, or 0.03 percentage point, to 3.80 percent. They rose to as high as 3.85 percent yesterday, a level unseen since Dec. 14. Excluding members of the euro region, the rate is the third highest after Israel and New Zealand among developed nations tracked by Bloomberg.
“The data that we’ve had over the last few days has put a question mark into the minds of the bears, and pension funds will seek to look for commodity growth and high yields,” said Kurt Magnus, executive director of currency sales in Sydney at Nomura Holdings Inc., Japan’s biggest brokerage. “With the Australian dollar and kiwi dollar, you get both.”
Orders for factory goods (TMNOCHNG) in the U.S. probably climbed 2 percent in November, according to economists surveyed by Bloomberg before a report today from the Commerce Department. That would be the most since July.
A report tomorrow from the Institute for Supply Management will probably show U.S. services industries expanded in December at the fastest pace in three months, with the organization’s non-manufacturing index (NAPMNMI) climbing to 53 according to economist estimates. The gauge was at 52 in November.
To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net
To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net
