WSJ:Australian Dollar Down Late, Moody's Europe Cut Weighs
Rates At 0510 GMT
Latest Change
AUD/USD 1.0680 -0.54%
AUD/JPY 83.18 -0.14%
6.25% Apr, 2015 3.5196% -0.0401
5.50% Apr, 2023 4.1996% -0.0475
10-Yr Spread To U.S. +212 bps +1 bps
SFE March 3-Year Futures 96.49 +0.03
SFE March 10-Year Futures 95.95 +0.035
SYDNEY (Dow Jones)--The Australian dollar slid in Asian trade Tuesday, weighed down by a Moody's downgrade of six European sovereigns.
Included in the downgrade were Italy, Spain and Portugal, with the move also serving as a threat to AAA-rated UK and France.
Further weighing on the Australian currency was some disappointment from traders that China didn't fix its currency notably stronger ahead of a key meeting between Chinese Vice President Xi Jinping and U.S. President Barack Obama meeting.
In addition, after a significant run in the local currency for the past week--following a surprise move by Australia's central bank to hold rates steady--some are expecting a pullback from levels not seen since October.
Mitul Kotecha, head global foreign strategist for Credit Agricole, is among those expecting a push back in the Australian dollar, saying that "for a currency in which speculative positioning is fast approaching all time highs I would be cautious of adding to long positions at current levels."
Kotecha adds the key factor in the next 48 hours will be Thursday's local employment report, with even a positive outcome unlikely to have anything more than a "brief positive impact on (the Australian dollar)."
At 0510 GMT, the Australian dollar was trading at US$1.0682, down from US$1.0740 late Monday. It touched an intraday high of US$1.0738 before sliding in the afternoon. Against the Japanese yen, the Australian currency changed hands at Y83.18, down from Y83.30 late Monday.
Kotecha tipped resistance for the Australian dollar at US$1.0845.
The bond market was more robust, with bond prices up slightly on both ends of the curve.
In a key development for that market, a senior official at the country's central bank on Tuesday said lawmakers should aim to keep government bond issuance at 10% to 12% of gross domestic product.
"From the bank's perspective, in terms of maintaining a liquid bond market, we think it would be desirable to maintain the stock on issue at some number around (10% to 12% of GDP) in the medium term," said Guy Debelle, assistant governor (financial markets) in a speech in Sydney.
Investors both locally and abroad have grown increasingly concerned about the potential size and scope of the local bond market should Australia return to surplus, as projected by the local government in the next year.
--By Geoffrey Rogow, Dow Jones Newswires; +61-2-8272-4686 ; geoffrey.rogow@dowjones.com
