Bloomberg News

Australian Dollar Erases Gain as Asian Stocks Extend Global Loss

June 02, 2011

June 2 (Bloomberg) -- Australia’s dollar erased gains against the U.S. currency as falling Asian stocks damped demand for higher-yielding assets.

The so-called Aussie strengthened earlier after the data showed retail sales rose 1.1 percent in April from the previous month, beating the median forecast in a Bloomberg News survey of economists. The New Zealand dollar dropped against 15 of its 16 most-traded peers after Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, said whole milk powder prices fell to the lowest in more than four months.

“A pessimistic outlook for the global economy is reflected in the drop in stocks,” said Daisaku Ueno, president of Research Institute Ltd. in Tokyo, a unit of Japan’s largest online currency broker. “That’s weighing on the Aussie while there is no domestic reason to sell it.”

Australia’s dollar traded at to $1.0615 as of 3:48 p.m. in Sydney from $1.0614 yesterday in New York, after rising to as high as $1.0660. The currency bought 85.99 yen from 85.93 yen. New Zealand’s dollar dropped to 81.20 U.S. cents from 81.46. It fetched 65.78 yen from 65.95 yen.

The MSCI Asia Pacific Index of regional shares lost 1.9 percent after data showed manufacturing growth from the U.S. to China and the euro region slowed last month and American employers hired fewer workers than forecast.

Auckland-based Fonterra said near-term contracts for whole milk powder prices declined 5.7 percent to $3,760 a metric ton at an auction, the lowest since Jan. 18.

Trade Surplus

Australia had a trade surplus of A$1.6 billion ($1.7 billion) in April, compared with a revised A$1.69 billion surplus in March, a Bureau of Statistics report showed today.

“Commodity/risk currencies suffered and the Australian dollar struggled to take advantage of better than expected” retail sales data, Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong, wrote in a note to clients today. “The trade balance was a little disappointing although we expect this to improve as mining comes back on line through the second quarter. We continue to look for an August hike although today’s data lend some weight to July.”

The Reserve Bank of Australia will meet on June 7. Swap traders are betting the central bank will boost its benchmark rate by 24 basis points over the next 12 months, according to a Credit Suisse AG index.

The central bank kept its key interest rate unchanged at 4.75 percent for the past five meetings after boosting borrowing costs seven times from October 2009 to November 2010.

--Editors: Nate Hosoda, Jonathan Annells

To contact the reporter on this story: Monami Yui in Tokyo at

To contact the editor responsible for this story: Rocky Swift at

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