Bloomberg News

Australian Dollar Drops Amid Europe Crisis, China Trade Concern

October 12, 2011

Oct. 12 (Bloomberg) -- The Australian dollar fell for a second day against its U.S. and Japanese counterparts amid concern Europe’s sovereign debt crisis will worsen and hamper global economic growth.

The so-called Aussie dropped against most of its 16 major peers on speculation trade relations between the U.S. and China may deteriorate after the U.S. Senate passed legislation aimed at pushing the Asian nation to boost the value of the yuan. New Zealand’s currency, nicknamed the kiwi, pared losses against the dollar and yen as a gauge of house prices rose to a 22-month high in September.

“The sentiment is still pretty cautious for the Aussie and for the kiwi,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “Global concerns are still there.”

Australia’s dollar fell 0.2 percent to 99.33 U.S. cents as of 4:23 p.m. in Sydney. It declined 0.1 percent to 76.20 yen. New Zealand’s dollar traded at 78.03 after earlier falling to as low as 77.43 cents. The currency was little changed at 59.88 yen.

The euro-region crisis “is systemic and must be tackled decisively,” European Central Bank President Jean-Claude Trichet said yesterday. “Sovereign stress has moved from smaller economies to some of the larger countries,” he told lawmakers in Brussels.

Yuan Valuation

The People’s Bank of China said it firmly opposes U.S. legislation aimed at pressuring China to appreciate its currency. The bill will seriously hurt trade relations and hamper the world economic recovery, the central bank said in a statement on its website today.

“There are some concerns over the impact of the U.S. Senate passing the China yuan bill,” said Forecast’s Lee. “This will be a negative for sentiment because China is warning this issue can trigger some trade wars.”

New Zealand home prices rose in September, with a Real Estate Institute index rising 1.7 percent from the previous month to 3,279.2. That’s the highest since November 2009. House sales rose to 5,235 from 5,192 in August, the Auckland-based institute said.

Losses in the Aussie were limited as data showed Australian home-loan approvals rose for a fifth month and before a report projected to indicate that employers added jobs in September for the first time since June.

Australian Jobs

“We are expecting a pickup in employment and that could provide a small boost to the Aussie,” said Joe Heffernan, a senior economist at St. George Bank Ltd. in Sydney. “In the shorter term, I see the Australian and New Zealand currencies supported.”

Australian employers added 10,000 jobs in September, after cutting 9,700 positions in August, the statistics bureau will probably say tomorrow, according to the median forecast of economists in a Bloomberg News survey.

“Strength from the employment report would represent an extension of the recent trend towards positive surprises from economic indicators,” Todd Elmer, head of Group-of-10 currency strategy for Asia excluding Japan at Citigroup Inc., wrote in a research note today. “On a stronger-than-expected outcome, we see upside” for the Australian dollar.

The number of loans granted to build or buy houses and apartments gained 1.2 percent in August from July, when they increased a revised 1.9 percent, the statistics bureau said in Sydney today.

An index of Australian consumer confidence rose 0.4 percent to 97.2, according to a Westpac Banking Corp. and Melbourne Institute survey of 1,200 consumers taken Oct. 3-8 and released today in Sydney.

--Editors: Benjamin Purvis, Naoto Hosoda

To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net

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


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