Bloomberg News

Aussie Declines on Rate Outlook; Kiwi Falls as Surplus Shrinks

June 27, 2011

June 27 (Bloomberg) -- The Australian dollar fell to a two-month low versus the greenback as traders added to bets the Reserve Bank will lower interest rates as Europe’s sovereign-debt crisis slows global growth.

New Zealand’s currency slid against all its major counterparts after a government report showed the trade surplus narrowed last month more than economists forecast. Both currencies also declined as a slump in commodity prices sapped investor demand for higher-yielding assets.

“That increasing-yield argument that had been supporting the Aussie dollar has dissipated,” said Thomas Averill, a director in Sydney at Rochford Capital, a currency and interest rate risk management company. “There’s generally a bit of risk aversion out there.”

Australia’s dollar fell 0.5 percent to $1.0439 at 2:24 p.m. in New York, from $1.0491 last week, after dropping to $1.0391, the lowest level since April 12. The currency rose 0.1 percent to 84.46 yen. New Zealand’s dollar declined 0.8 percent to 80.55 U.S. cents and slid 0.2 percent to 65.18 yen.

Benchmark rates are 4.75 percent in Australia and 2.5 percent in New Zealand, compared with as low as zero in the U.S. and Japan, attracting investors to the South Pacific nations’ assets. The risk in such trades is that currency market moves will erase profits.

New Zealand’s dollar fell for a third day versus the greenback after the government said the trade surplus shrank to NZ$605 million ($488 million) in May. Economists surveyed by Bloomberg forecast a surplus of NZ$1 billion.

--With assistance from Joe Ragazzo in New York. Editors: Dennis Fitzgerald

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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


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