BLBG:Australian, New Zealand Dollars Decline Versus Peers Before Europe Summit
The Australian and New Zealand dollars weakened before European Union leaders meet to discuss the region’s debt crisis at a summit in Brussels today.
The so-called Aussie slid versus all of its 16 major counterparts amid concern Italy’s funding costs will surge at an auction today after Fitch Ratings cut the nation’s credit grade last week. New Zealand’s currency, nicknamed the kiwi, halted its longest advance in 10 months as Asian stocks fell, extending a global slump in shares.
“We’re still quite a long way from solving the issues in Europe and market cynicism can certainly raise its ugly head again,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest-rate risk-management company. “Before the Aussie and kiwi get some support again, you’re going to need to see a bit of a dip.”
Australia’s dollar declined 0.7 percent to $1.0588 as of 3:54 p.m. in Sydney, and slid 0.7 percent to 81.19 yen. New Zealand’s currency fell 0.5 percent to 82.09 U.S. cents, ending a six-day advance, the longest since March. It dropped 0.5 percent to 62.94 yen.
The MSCI Asia Pacific Index lost 0.5 percent. The Standard & Poor’s 500 Index dropped 0.2 percent on Jan. 27 and the Stoxx Europe 600 Index retreated 1 percent.
Australian bonds rose, pushing the yield on benchmark 10- year securities down six basis points, or 0.06 percentage point, to 3.755 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell three basis points to 2.77 percent.
Brussels Summit
EU heads of government will meet in the Belgian capital today to put the finishing touches on a German-led deficit- control treaty and endorse the statutes of a 500 billion-euro ($659 billion) rescue fund to be set up this year.
Italy is scheduled to sell debt maturing in 2016, 2017, 2021 and 2022 today, after Fitch reduced the nation’s credit score two levels to A- from A+ on Jan. 27. Spain was lowered two notches to A from AA-. Ratings on Belgium, Slovenia and Cyprus were also cut, while Ireland’s was maintained.
Australia’s currency depreciated 0.4 percent today, while its New Zealand counterpart lost 0.2 percent, the two worst performances among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes.
A gauge of New Zealand’s services industry grew at a slower pace last month, according to a report by Bank of New Zealand Ltd. and Business New Zealand, a Wellington-based employer group. The Performance of Services index fell to 50.6 in December from a revised 56.2 in November. A reading above 50 indicates an expansion.
‘Shaky Fundamentals’
New Zealand’s “domestic economy remains about as subdued as expected,” Peter Jolly, the Sydney-based head of market research at National Australia Bank Ltd., wrote in a report today. “Renewed European debt concerns and an increase in global risk aversion would refocus attention on the NZD/USD’s shaky fundamentals, knocking the currency lower.”
Governor Alan Bollard won’t seek another five years when his current term ends Sept. 25, the Reserve Bank of New Zealand said in an e-mailed statement today. Bollard left the key rate at a record-low 2.5 percent last week and said on Jan. 27 the central bank will need to keep monitoring quake reconstruction “to judge whether the level of the cash rate continues to be appropriate.”
To contact the reporter on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net
