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Nov. 2 (Bloomberg) -- The Australian and New Zealand dollars dropped versus the yen as a referendum pledge by Greece’s prime minister increased concern the region’s debt crisis is worsening.
Australia’s dollar erased its advance against its U.S. counterpart after the Federal Reserve refrained from taking additional steps to ease monetary policy. New Zealand’s dollar slumped against the greenback before European leaders convene emergency talks today to tell Greece there’s no alternative to the budget cuts imposed in the bailout plan.
“The chances of a disorderly default in Greece are somewhat higher now than this time last week, so I think the market is right to be concerned about what’s happening over there,” said Gavin Stacey, chief interest-rate strategist at Barclays Plc in Sydney. Australia’s currency may drop to 93.88 U.S. cents by the end of this month, he said.
Australia’s dollar fell 0.4 percent to 80.58 yen at 1:52 p.m. New York time. The Aussie was little changed at $1.0321 after earlier gaining as much as 1 percent. The New Zealand dollar dropped 1.2 percent to 61.57 yen. The currency fell 0.8 percent to 78.85 U.S. cents.
The MSCI Asia Pacific Index of stocks dropped 1.1 percent, while the MSCI World Index of equities rose 0.9 percent.
The Fed, in a statement today following a two-day policy meeting, raised its assessment of the U.S. economy while saying “significant downside risks” remain.
Greece’s cabinet gave unanimous backing for a referendum on the country’s latest bailout package, a government official told reporters in Athens. Government spokesman Elias Mossialos said the referendum will be held “as soon as possible.”
--With assistance from Catarina Saraiva in New York. Editors: Dennis Fitzgerald, Paul Cox
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