Bloomberg News

Aussie Dollar Falls as Fed Cuts Growth Forecast, Kiwi Gains

June 23, 2011

June 23 (Bloomberg) -- The Australian dollar fell against the greenback for a second day after the Federal Reserve signaled it wouldn’t add to record stimulus even after growth slowed, spurring declines in shares and higher-yielding assets.

The Aussie dropped after the Fed reiterated that it will complete the second round of quantitative easing, or so-called QE2, this month and maintain existing stimulus to support a flagging recovery. New Zealand’s dollar dropped, after gaining earlier when the government offered to buy thousands of homes damaged by Christchurch’s earthquakes.

“Some in the market had expected the Fed to mention a QE3, but it didn’t happen, pushing down stocks and causing the dollar to be bought back,” said Nobuhiko Akai, senior manager of the foreign-exchange trading department in Tokyo at Bank of Tokyo- Mitsubishi UFJ Ltd. “As commodities and stocks fall, the Aussie seems to be becoming top-heavy.”

Australia’s dollar fell 0.8 percent to $1.0486 at 12:15 p.m. in New York from $1.0575 yesterday. The Aussie dropped 0.6 percent to 84.36 yen from 84.90 yen. New Zealand’s dollar lost 0.5 percent to 81.03 U.S. cents from 81.46 cents, and it weakened to 65.19 yen from 65.41 yen.

Fed governors and regional-bank presidents now say the U.S. economy will expand by a range of 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.

New Zealand’s government offered to buy about 5,000 quake- damaged homes in Christchurch as part of a recovery package that will see parts of the South Island city’s eastern suburbs disappear.

--With assistance from A. Catarina Saraiva in New York. Editors: Rocky Swift, Dave Liedtka

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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


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