Bloomberg News

Australia, N.Z. Dollars Fall to 3-Week Lows on Greek Debt Crisis

June 16, 2011

June 16 (Bloomberg) -- The Australian and New Zealand dollars declined to three-week lows against their U.S. counterpart as speculation Greece’s debt crisis is worsening damped demand for higher-yielding assets.

New Zealand’s currency, nicknamed the kiwi, also weakened after Finance Minister Bill English said its strength was hurting the economy and that keeping interest rates low will help growth. The kiwi fell against all of its 16 most-traded peers. U.S. data showed an unexpected contraction in manufacturing in the Philadelphia region, following a factory measure yesterday that showed an unexpected drop in New York.

“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 0.6 percent to $1.0512 at 3:03 p.m. in New York, from $1.0577 yesterday. It touched $1.0478, the least since May 25. The currency dropped 1 percent to 84.80 yen, from 85.63 yen.

The New Zealand dollar depreciated 0.9 percent to 79.97 U.S. cents after earlier reaching 79.72 cents, the weakest since May 26. It slid as much as 1.5 percent to 64.34 yen, the lowest since May 23, before trading at 64.54 yen, down 1.2 percent.

Stock Slump

Global equities dropped, with the MSCI World Index losing 1.1 percent.

The Standard & Poor’s 500 Index declined 0.4 percent after the Federal Reserve Bank of Philadelphia’s general economic index fell to minus 7.7 in June, the lowest since July 2009, from 3.9 the prior month. Readings less than zero signal contraction. The New York Fed’s Empire State manufacturing index for June expectedly dropped to 7.8 yesterday.

The Thomson Reuters/Jefferies CRB Index of raw materials was down 0.6 percent after falling 2.3 percent yesterday, the most in five weeks.

Greek Prime Minister George Papandreou said yesterday he would reshuffle his Cabinet and then call a confidence vote in parliament after attempts to garner opposition support for an austerity plan failed. Confidence debates in Greece typically take three days with the ballot at midnight, meaning the vote isn’t likely before the evening of June 19.

--With assistance from Allison Bennett in New York. Editors: Greg Storey, Dave Liedtka

To contact the reporters 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: Dave Liedtka at dliedtka@bloomberg.net


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