Bloomberg News

Aussie, N.Z. Dollars Trade Near One-Week Low on Europe Concern

December 29, 2011

Dec. 30 (Bloomberg) -- The Australian and New Zealand dollars traded within 0.7 percent of the lowest in more than a week against the yen amid concern Europe’s debt crisis is spreading, sapping demand for riskier assets.

Australian government bonds gained, pushing the 10-year yield to a record low, after Italy sold less than its maximum target at debt auctions yesterday even as borrowing costs fell. Losses in the so-called Aussie and kiwi dollars were limited on prospects Asian stocks will extend a global rally in equities.

“I think the risks in Europe will get worse before it gets better,” said Matt Brady, executive director for foreign exchange at JPMorgan Chase & Co. in Sydney. “Risk sentiment is going to be dire as we head into 2012 and I’m not a believer in being long any risk currencies.”

The Australian dollar traded at 78.69 yen as of 10:48 a.m. in Sydney from 78.69 yen yesterday in New York when it fell as low as 78.18, the weakest since Dec. 20. The Aussie fetched $1.0133 from $1.0137 yesterday, when it touched $1.0044, also the lowest since Dec. 20.

New Zealand’s dollar bought 59.92 yen from 59.88 yesterday, when it slipped to a low of 59.57, the least since Dec. 20. It was at 77.15 U.S. cents from 77.13.

The yield on Australia’s 10-year notes fell four basis points, or 0.04 percentage point, to 3.67 percent. It earlier dropped to 3.648 percent, the lowest on record.

The MSCI World Index advanced 0.8 percent yesterday, while the Standard & Poor’s 500 Index rose 1.1 percent.

Italy yesterday sold 7 billion euros ($9.1 billion) of debt, falling short of the Treasury’s 8.5 billion-euro target, bringing the total raised this week to almost 20 billion euros. Borrowing costs were lower than at previous auctions of similar- maturity issues. Benchmark 10-year bonds stayed lower after the auction, with 10-year yields at 7.03 percent at the close.

“I think the bond auction was received OK, but they didn’t get away the allotment that they wanted,” said JPMorgan’s Brady. “Certainly with the concerns around Europe, I have no reason to believe the world’s a better place at the moment.”

The Australian dollar is poised to end the year 1 percent lower versus the greenback and 5.2 percent lower versus the yen. New Zealand’s currency is set to lose 5.2 percent against its Japanese counterpart and 1.1 percent against the dollar.

--Editors: Benjamin Purvis, Naoto Hosoda

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


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