BLBG:Australian, New Zealand Dollars Fall to 3-Week Lows as Asian Stocks Drop
The Australian and New Zealand dollars declined to three-week lows against the greenback as Asian equities extended a worldwide slump in stocks and commodity prices fell, damping demand for higher-yielding assets.
The so-called kiwi weakened against 13 of its 16 major counterparts after Finance Minister Bill English said the local currency’s strength was hurting the economy and keeping interest rates low is better for growth. Demand for the South Pacific currencies also weakened as concern about Greece’s debt crisis mounts and before U.S. data this week likely to indicate the recovery is losing momentum.
“The risk-off mood is dominant in the markets because of concerns over Greece and a slowdown in the U.S. growth, sending stocks and commodities lower,” said Takuya Kawabata, a researcher in Tokyo at Gaitame.com Research Institute Ltd., a unit of Japan’s largest currency margin company. “In this environment, money wouldn’t find its way into commodity currencies such as the Aussie and kiwi.”
Australia’s dollar weakened to $1.0517 as of 3:45 p.m. in Sydney from $1.0577 in New York yesterday, after touching $1.0511, the least since May 26. The currency dropped to 85.05 yen from 85.63 yen. The New Zealand dollar touched 80.03 U.S. cents, the weakest since May 26, before trading at 80.18 cents from 80.66 cents. It slid 0.8 percent to 64.81 yen.
Global Equity Slump
The MSCI Asia Pacific Index of regional shares lost 2 percent. The Standard & Poor’s 500 Index dropped 1.7 percent yesterday after reports showed manufacturing in the New York region unexpectedly shrank and the cost of living in the U.S. rose more than forecast. The Thomson Reuters/Jefferies CRB Index of raw materials fell 2.3 percent, the most in five weeks.
European Central Bank Governing Council member Nout Wellink said the emergency fund for euro-zone countries should be doubled if private investors are pressured to contribute to additional refinancing aid for Greece, Het Financieele Dagblad reported, citing an interview.
U.S. building permits declined 1.1 percent in May to a 557,000 annual pace, economists predicted before a report today. The Thomson Reuters/University of Michigan index of consumer sentiment slipped in June to 74 from 74.3 the previous month, according to a Bloomberg News survey of economists taken before the report is released tomorrow.
U.S. Economy
“The U.S. economy is slowing and higher inflation readings mean the market perceives no more stimulus from the Fed, so equities are under pressure,” said Tony Allen, global head of foreign-exchange trading in Sydney at Australia & New Zealand Banking Group Ltd. “We’ve had massive support in Aussie for quite some time and that’s starting to be eroded quite a lot.”
Demand for the so-called Aussie was supported after Reserve Bank of Australia Governor Glenn Stevens reiterated yesterday policy makers will need to raise interest rates at some stage.
Stevens also said the underlying rate of inflation “is more likely to rise than fall” in the next few years.
“Expectations for the interest-rate increases may limit downward pressure for the Aussie to some extent,” said Gaitame.com’s Kawabata.
Australia’s two-year bond yield fell below the benchmark interest rate of 4.75 percent today, declining to as low as 4.655 percent, as concern over slowing growth boosted demand for safer assets.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
