Bloomberg News

Australian, New Zealand Dollars Drop Amid European Debt Concern

November 15, 2011

Nov. 16 (Bloomberg) -- The Australian and New Zealand dollars weakened for a third day as concern that Europe’s financial woes are deepening sapped demand for riskier assets.

New Zealand’s currency fell to a six-week low after Italy’s 10-year yields rose above 7 percent yesterday as premier-in- waiting Mario Monti prepares to present his new cabinet today. The yield on Australia’s three-year government bond fell to the lowest in 2 1/2 years after a report showed growth in wages in the nation slowed.

“We’re very concerned about what’s happening in Europe,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “The situation in the bond market looks very grave. I think the clock is ticking on the Aussie.”

The Australian dollar weakened 0.9 percent to $1.0085 as of 1:54 p.m. in Sydney, having fallen 1.9 percent over the past three days. The currency dropped 0.9 percent to 77.74 yen from yesterday in New York. It earlier touched 77.66 yen, the lowest since Oct. 18.

New Zealand’s dollar declined 0.6 percent to 76.65 U.S. cents after earlier touching 76.58 U.S. cents, the lowest since Oct. 6. The so-called kiwi slid 0.5 percent to 59.09 yen from yesterday, when it tumbled 1.2 percent.

Italy’s bonds led a slump in euro-area government debt yesterday with the country’s 10-year yield touching 7.073 percent, above the 7 percent level that spurred Greece, Ireland and Portugal to seek bailouts. Spain is scheduled to sell as much as 4 billion euros ($5.4 billion) in bonds tomorrow after its borrowing costs rose at bill auctions yesterday.

Parity With Dollar

Westpac’s Callow said the Australian dollar may decline to reach parity with its U.S. counterpart this week.

Australia’s wage price index, which measures hourly pay rates excluding bonuses, rose 0.7 percent in the third quarter from the previous three months, when it gained 0.9 percent, the statistics bureau said today in Sydney. The median forecast in a Bloomberg News survey of economists was for a 0.9 percent increase.

An index of Australia’s leading economic indicators decreased 0.3 percent from a month earlier to 286, Westpac and the Melbourne Institute said in a statement in Sydney today.

Australia’s government bonds advanced, with the yield on three-year debt dropping to as low as 3.3 percent, the least since March 2009. Ten-year yields fell seven basis points to 4.01 percent, the lowest since Oct. 4.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates based on three-month bill rates, fell to as low as 2.77 percent, the least since at least 1993 when Bloomberg started collecting the data. Swaps are often used to speculate on changes in interest rates.

--Editors: Jonathan Annells, Garfield Reynolds

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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