Bloomberg News

Aussie, N.Z. Dollars Trade Near 2-Week Lows on Euro Debt Concern

December 13, 2011

Dec. 14 (Bloomberg) -- The Australian and New Zealand dollars traded 0.2 percent from two-week lows as concern Europe’s debt crisis may prompt sovereign downgrades sapped demand for riskier assets.

The so-called Aussie fell below parity with its U.S. counterpart yesterday after the Federal Reserve refrained from taking additional actions to bolster growth. Reserve Bank of Australia Deputy Governor Ric Battellino said a likely fall in the currency will help insulate the nation from an economic slump in Europe. Demand was damped for both South Pacific currencies as Asian shares extended a global slump and data showed Australian consumer confidence was at a four-month low.

“The momentum is downwards, so it’s possible that negative sentiment could continue to drive the Aussie lower,” said Janu Chan, an economist at St. George Bank Ltd. in Sydney. “There’s still a lot of nervousness about what will happen in Europe. There could be some risk that the nations could be downgraded.”

The Australian dollar fell 0.2 percent to $1.00 in Sydney as of 1:19 p.m. in Sydney from yesterday when it touched 99.80 U.S. cents, the lowest since Nov. 30. The Aussie slid 0.1 percent to 78.03 yen. New Zealand’s currency lost 0.1 percent to 75.60 U.S. cents after earlier falling to 75.41 cents, the weakest since Nov. 29. It declined 0.1 percent to 58.98 yen.

Australia’s government bonds fell, pushing the yield on the 10-year note up by four basis points, or 0.04 percentage point, to 3.85 percent. The rate reached 3.78 percent yesterday, the lowest since at least September 1992 when Bloomberg began compiling data.

The MSCI Asia Pacific Index of shares lost 0.6 percent, following an 0.8 percent drop in MSCI’s World Index yesterday.

Ratings Risk

Moody’s Investors Service said on Dec. 12 that last week’s euro crisis summit didn’t provide new measures which would lead to a resolution of Europe’s debt problems, and it would review European Union sovereign ratings in the first quarter of 2012. Standard & Poor’s said before the meeting that it may cut the credit rankings of euro members.

Fed policy makers left unchanged the central bank’s statement that economic conditions are likely to warrant “exceptionally low” interest rates “at least through mid-2013.” The statement reiterated a warning at from two previous meetings that global financial market strains “pose significant downside risks to the economic outlook.”

“There were some comments that were more negative on the global economy,” said St. George’s Chan. “That’s also added to the more negative sentiment and the Aussie did fall quite sharply.”

Consumer Confidence

Australia’s currency maintained declines after a private survey showed the nation’s consumer confidence dropped to a four-month low in December. Sentiment snapped three months of gains when it fell 8.3 percent to 94.7 in December, the lowest level since August, a Westpac Banking Corp. and Melbourne Institute survey showed today in Sydney.

“If the European economy were to slow markedly over the next year or so, Australia would be affected,” the RBA’s Battellino said in a prepared remarks for a speech today in Sydney. “It is also likely, however, that if that were to eventuate, the exchange rate of the Australian dollar would fall, as it has when global growth has weakened in the past.”

The RBA lowered the overnight cash-rate target to 4.25 percent from 4.5 percent on Dec. 6, citing “considerable turbulence” in financial markets and an increased chance of a “further material slowing in global growth.”

--Editors: Rocky Swift, Naoto Hosoda

To contact the reporter on this story: Mariko Ishikawa in Tokyo at

To contact the editor responsible for this story: Rocky Swift at

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