Bloomberg News

Aussie Set for Second Weekly Loss as Stocks, Commodities Fall

July 14, 2011

July 15 (Bloomberg) -- Australia’s dollar headed for a second weekly loss against the greenback and the yen as concern the global economic recovery is slowing sapped demand for assets linked to growth.

The so-called Aussie traded near an eight-month low against New Zealand’s dollar as traders bet Australian policy makers will be less likely to raise interest rates than those in the smaller nation. New Zealand’s currency was poised for a third weekly gain versus the dollar after a report yesterday showed the economy grew twice as fast as the central bank forecast.

“The market still remains very worried,” said Mike Burrowes, a currency strategist at Bank of New Zealand Ltd. in Wellington. “Against that backdrop, risk sentiment does look a little bit vulnerable. The Aussie is taking its cues from developments offshore.”

Australia’s dollar traded at $1.0736 as of 11:52 a.m. in Sydney, from $1.0724 in New York yesterday, heading for a 0.2 percent loss this week. The currency was at 84.86 yen from 84.86 yen, having dropped 2.1 percent since July 8.

New Zealand’s dollar bought 84.35 U.S. cents from 84.21 cents, on course for a 0.7 percent gain this week. The so-called kiwi traded at 66.69 yen from 66.63 yen.

Stocks, Commodities

The MSCI Asia Pacific index of shares fell 2 percent this week, snapping three weeks of gains. It was little changed today. The Thomson Reuters/Jefferies CRB Index of 19 Raw Materials slumped 1.3 percent.

Demand for the two South Pacific currencies against the greenback was boosted after Standard & Poor’s became the second ratings company to say it may downgrade the U.S.’s top credit grade. Moody’s Investors Service put the U.S. rating on review July 13 for a downgrade on concern officials won’t raise the nation’s debt limit in time to prevent a default.

A report yesterday showed U.S. retail sales stagnated in June as falling home prices and unemployment above 9 percent damp growth in the world’s largest economy.

New Zealand’s currency advanced against 14 of its 16 major counterparts this week as wagers the central bank will lift borrowing costs increased after first-quarter gross domestic product rose 0.8 percent, exceeding the central bank’s prediction for a 0.3 percent advance.

‘Encouraging Signs’

“In New Zealand, growth has sort of really languished for quite a while, but now there are pretty encouraging signs that growth is picking up,” Burrowes said. “We expect the kiwi- Aussie interest-rate differential to continue to narrow, which obviously supports a move lower” for Australia’s dollar versus the kiwi.

Traders are betting the Reserve Bank of Australia will cut its benchmark rate by 34 basis points over the next 12 months, compared with a forecast for 69 basis points of increases in New Zealand, Credit Suisse Group AG indexes show.

Australia’s currency traded at NZ$1.2730 from NZ$1.2734 yesterday, when it depreciated to NZ$1.2679, the weakest level since Nov. 22.

Ten-year Australian bond futures for September delivery were little changed today at 95.035 on the Sydney Futures Exchange. Australia’s 10-year bond yields climbed four basis points to 4.96 percent.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates which is sensitive to interest-rate expectations, was little changed at 3.43 percent.

--Editors: Nicholas Reynolds, Nate Hosoda

To contact the reporter on this story: Kristine Aquino in Singapore at Kaquino1@bloomberg.net

To contact the editor responsible for this story: Nicholas Reynolds at nreynolds2@bloomberg.net


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