Bloomberg News

Aussie, Kiwi Drop to One-Week Low Versus Yen on Europe Concern

December 29, 2011

Dec. 29 (Bloomberg) -- The Australian and New Zealand dollars dropped to the lowest level in a week against the yen as concern increased that Europe’s debt crisis may deepen, damping demand for higher-yielding assets.

The South Pacific currencies tumbled as Italian bond yields rose after the nation sold less than its maximum target at an auction. Losses in the Aussie and kiwi were limited as U.S. stocks rebounded after economic reports signaled the U.S. recovery is quickening.

“The European problem is going to continue to cause spooks in the market and some spikes in risk aversion,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest-rate risk-management company. “The moves are exaggerated by the lack of liquidity.”

The Australian dollar fell 0.2 percent to 78.53 yen at 11:44 a.m. in New York. It earlier dropped as low as 78.18, the weakest since Dec. 20. The Aussie touched $1.0044, also the lowest since Dec. 20, before trading little changed at $1.0104.

New Zealand’s dollar slid 0.2 percent to 59.57 yen, the lowest since Dec. 20, before trading at 59.85 yen, 0.1 percent below yesterday’s close. The kiwi fetched 76.98 U.S. cents, after dropping as low as 76.54 U.S. cents, the least since Dec. 21.

The yield on benchmark Italian 10-year bonds traded above 7 percent, the level that forced Greece, Portugal and Ireland to seek bailouts, after the nation auctioned debt. The Treasury in Rome sold 2.5 billion euros ($3.2 billion) of securities due in 2014, less than the 3 billion euro maximum for the sale.

The Standard & Poor’s 500 Index rose 0.7 percent after an index of pending U.S. home sales rose more than economists forecast, while earlier reports showed stronger-than-projected growth in business activity and a drop in jobless claims over the past month to a three-year low.

--With assistance from Catarina Saraiva in New York. Editors: Paul Cox, Kenneth Pringle

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

To contact the editor responsible for this story: Naoto Hosoda at nhosoda@bloomberg.net


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