Bloomberg News

Australian Currency Weakens as Europe Struggles to Stem Crisis

November 27, 2011

Nov. 25 (Bloomberg) -- The Australian dollar fell for a fourth straight week versus its U.S. counterpart as European leaders’ struggle to agree on measures to resolve the region’s debt crisis curbed demand for higher-yielding assets.

The Aussie lost for a third week against the yen after Italy sold 183-day bills at a 14-year high. It briefly pared its weekly loss against the U.S. dollar today amid bets European leaders may do more to fight the crisis. New Zealand’s dollar touched the lowest versus the greenback since March as it fell for a fourth week before the nation holds general elections.

“There is some further downside risk in both equity markets and associated risk assets, such as the Aussie and kiwi,” said Thomas Averill, a director at the currency and interest-rate risk management company Rochford Capital in Sydney. There is “skepticism that is out there in the markets over Europe’s ability to solve this,” he said.

The Australian dollar tumbled 2.7 percent on the week to 97.37 U.S. cents at 12:06 p.m. New York time, from $1.0008 on Nov. 18. It was the Aussie’s first five-day loss since Oct. 28. The currency was little changed today after rising as much as 0.4 percent. It slid 1.7 percent to 75.69 yen on the week after gaining 0.8 percent today.

New Zealand’s dollar, nicknamed the kiwi, depreciated 2 percent on the week to 74.17 U.S. cents in its fourth consecutive five-day loss. It was little changed on the day after falling earlier to 73.71 cents, the weakest level since March. The kiwi fell 1 percent on the week to 57.61 yen, after paring the loss as it gained 0.8 percent today.

The Australian currency may decline toward 95.5 cents, while its New Zealand counterpart may approach 73 cents in the coming weeks, Averill said.

Italian Auction

Italy sold 8 billion euros ($10.6 billion) of 183-day bills at a rate of 6.504 percent, the highest since August 1997 and up from 3.535 percent at an Oct. 26 sale. Demand dropped to 1.47 times the amount on offer, from 1.57 times last month.

The MSCI World Index was up 0.3 percent after falling earlier as much as 0.6 percent.

New Zealand votes today in an election that polls show will hand Prime Minister John Key a second term.

“Expect a nervous start to trading next week if the result is not clear enough,” ANZ National Bank Ltd. said in a report.

--With assistance from Candice Zachariahs in Sydney. Editors: Greg Storey, Kenneth Pringle

To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Allison Bennett in New York at abennett23@bloomberg.net

To contact the editor responsible for this story: Robert Burgess at bburgess@bloomberg.net


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