BLBG:Australian, New Zealand Dollars Decline Before Italy, Spain Debt Auctions
The Australian and New Zealand dollars declined, snapping two-day gains, as Spain and Italy prepare to auction debt this week amid concern their credit ratings may be cut.
The New Zealand currency, known as the kiwi, fell from a two-month high versus the dollar after Fitch Ratings said Italy faces a “significant chance” of a downgrade, sapping demand for riskier assets. Losses in the South Pacific currencies were limited before reports forecast to show a slowdown in China’s inflation rate that may provide scope for the central bank to ease monetary policy.
“Australia and New Zealand are not immune to what’s happening in the euro zone,” said Lee Wai Tuck, a strategist at Forecast Pte in Singapore. “Even though there’s buying of Aussie and kiwi against euro, they’re likely to come under pressure” against the U.S. dollar.
Australia’s dollar declined 0.3 percent to $1.0279 as of 4:30 p.m. in Sydney from yesterday in New York, when it appreciated 0.7 percent. The Aussie fell 0.2 percent to 79.07 yen.
New Zealand’s currency slid 0.1 percent to 79.35 U.S. cents from yesterday, when it reached 79.66, the highest level since Nov. 9. The kiwi was little changed at 61.04 yen from 61.05.
Australia’s government bonds declined were little changed, with yields on the 10-year security at 3.78 percent.
Debt Auctions
Spain will sell bonds due in 2015 and 2016 tomorrow. Italy will auction bills on Jan. 12 and debt due in 2014 and 2018 on Jan. 13.
“There are still concerns because Italy still has got to issue quite a lot of bonds this year,” said Forecast’s Lee. “Going ahead, it may be quite difficult to find demand.”
Fitch Ratings said yesterday Italy faces a “significant chance” of a downgrade. The company is reviewing nations including Italy and Spain and will make a decision by the end of the month. Fitch’s action followed reviews announced by Standard & Poor’s and Moody’s Investors Service on euro-area nations.
Losses in the Aussie and kiwi were limited amid speculation China, Australia’s top trading partner and New Zealand’s second- largest export destination, may loosen monetary policy to boost growth as inflation slows.
China Inflation
China’s consumer prices probably rose 4 percent in December from a year earlier, according to median estimate of economists surveyed by Bloomberg News before the statistics bureau releases its figures tomorrow. That would be the lowest inflation rate since September 2010.
The world’s second-largest economy is experiencing a slowdown in trade, with import growth falling to a two-year low in December, according to a Chinese government report published yesterday. The data also showed a deceleration in export growth.
“We’re seeing evidence of softening growth,” said Janu Chan, an economist at St. George Bank Ltd. in Sydney. Yesterday’s trade figures are “seen as raising expectations of monetary easing,” said Chan.
The People’s Bank of China announced a 50-basis-point cut to the reserve requirements ratio for the nation’s banks in November, the first reduction since 2008.
To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net
To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net
