Bloomberg News

Aussie, Kiwi Weaken as Greece Default Concern Saps Yield Demand

June 20, 2011

June 20 (Bloomberg) -- The Australian and New Zealand dollars fell against all the other major currencies as concern the Greek government will default on its debt sapped demand for higher-yielding assets.

The so-called Aussie dropped for a fourth day versus the yen as commodity prices declined, hurting the outlook for the nation’s exports. European governments on the weekend failed to agree on releasing a loan payment to spare Greece from default, increasing pressure on Prime Minister George Papandreou to first deliver budget cuts in the face of domestic opposition.

“The Aussie outlook in the next few weeks, or even few months, doesn’t look that great,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp, Australia’s second-largest lender. “Global risk aversion remains high. That’s mainly because the European situation is still quite unstable.”

Australia’s dollar fell to $1.0540 as of 4:14 p.m. in Sydney from $1.0623 in New York last week, extending its loss in the past month to 1.1 percent. The so-called Aussie declined 0.6 percent to 84.55 yen. New Zealand’s dollar slipped 0.8 percent to 80.65 U.S. cents, and slid 0.5 percent to 64.70 yen.

Crude oil fell as much as 1.7 percent in afterhours trading on the New York Mercantile Exchange and copper on the London Metal Exchange dropped as much as 1.3 percent.

Euro-area finance ministers pushed Greece to pass laws to cut the deficit and sell state assets. The Greek government needs parliamentary approval for a 78 billion-euro ($111 billion) program of budget cuts to ensure the payment of a fifth loan under last year’s 110 billion-euro bailout plan.

Service Expansion

New Zealand’s dollar weakened even after reports showed services industry expanded at a faster pace in May and manufacturing volume increased.

The performance of services index climbed to 52.8 from 52.6 in April, Bank of New Zealand Ltd. and Business New Zealand, an employer group, said in an e-mailed statement. A reading above 50 indicates an expansion. Manufacturing output rose 1.9 percent in the first quarter after a 3.7 percent increase the previous period, Statistics New Zealand said.

The terms of trade, which are at a 39-year high, and demand for exports from Asia and Australia are reasons to be positive about New Zealand’s economic future, Finance Minister Bill English said in a video statement released today.

“The New Zealand economy remains resilient,” supporting the kiwi, said Kengo Suzuki, manager of the foreign bond department in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest listed bank.

RBA Minutes

The Reserve Bank of Australia will tomorrow release minutes of its June 7 meeting, at which policy makers left its benchmark interest rate at 4.75 percent for sixth meeting. Central bank Governor Glenn Stevens reiterated June 15 the RBA needs to raise interest rates “at some stage.”

“The RBA minutes this Tuesday will be more important than usual given the conflicting views coming from RBA officers and non-executive Board members,” Barclays Plc strategists including London-based Sara Yates wrote in a note to clients. “There is little priced in by the market in terms of rate hikes this year, so a tone in the minutes less hawkish than the rhetoric of RBA officers would have only a small negative impact on the Australian dollar.”

Ten-year Australian bond futures for June delivery rose 0.06 to 94.94 on the Sydney Futures Exchange. The implied yield fell five basis points to 5.07 percent.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was little changed at 3.31 percent.

--Editors: Nicholas Reynolds, Nate Hosoda

To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.


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