Bloomberg News

Aussie Declines as Fed Cuts Growth Forecast, Sapping Risk Demand

June 22, 2011

June 22 (Bloomberg) -- The Australian dollar dropped against the greenback after the Federal Reserve lowered its forecast for U.S. economic growth, discouraging demand for higher-yielding assets including stocks.

“The Aussie came off,” said Robert Sinche, global head of currency strategy in Stamford, Connecticut, at Royal Bank of Scotland Plc. “The shorter-terms moves have been dominated by what’s been going on in equities.”

Australia’s dollar slid 0.3 percent to $1.0573 at 3:55 p.m. in New York, from $1.0605 yesterday. New Zealand’s currency pared its gain, rising 0.2 percent to 81.44 U.S. cents after earlier appreciating 0.9 percent.

The Standard & Poor’s 500 Index decreased 0.5 percent, while the Dow Jones Industrial Average fell 0.5 percent.

Fed governors and regional-bank presidents now say the U.S. economy will expand by 2.7 percent to 2.9 percent this year, down from April’s forecasts of 3.1 percent to 3.3 percent, based on the median range of projections. Growth in 2012 will range from 3.3 percent to 3.7 percent, compared with forecasts of 3.5 percent to 4.2 percent in April, the Fed said.

The U.S. central bank refrained from signaling additional economic stimulus after the completion this month of its $600 billion bond-purchase program.

--Editors: Dennis Fitzgerald

To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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