Bloomberg News

Australian, N.Z. Dollars Fall on Europe, Before China GDP Report

January 23, 2012

Jan. 16 (Bloomberg) -- The Australian and New Zealand dollars fell versus the U.S. and Japanese currencies before a report tomorrow forecast to show China’s economy grew the least in 10 quarters in the last three months of 2011.

Both South Pacific currencies weakened as Asian stocks dropped after Standard & Poor’s lowered the credit ratings of nine euro-zone nations, increasing concern Europe’s worsening debt crisis will hurt the global economy. The so-called Aussie maintained its decline even after a statistics bureau report showed home loans rose in November by more than economists had forecast.

“A weaker-than-expected number would likely see a bit of pressure on the Aussie dollar,” said Jeremy Jukes, a foreign- exchange dealer in Auckland at Velocity Trade Ltd., a currency brokerage, referring to China’s economic output. “A drop in GDP is probably not going to do the Aussie too many favors as China is Australia’s largest trading partner.”

Australia’s dollar weakened 0.4 percent to $1.0286 as of 4:26 p.m. in Sydney and fell 0.5 percent to 79.02 yen. It reached a record high of 81.55 euro cents before trading at 81.35. New Zealand’s dollar declined 0.2 percent to 79.34 U.S. cents and was 0.4 percent lower at 60.95 yen.

Chinese gross domestic product, the value of all goods and services produced, rose 8.7 percent from a year earlier, the slowest pace since the second quarter of 2009, according to the median forecast of economists surveyed by Bloomberg News. The data, and indicators for investment, retail sales and industrial production, are scheduled for release tomorrow in Beijing.

Stocks Decline

The MSCI Asia-Pacific Index of stocks fell 1.2 percent as investors sold higher-yielding assets amid concern Europe’s sovereign-debt crisis will escalate.

France and Austria lost their top credit ratings in the string of downgrades on Jan. 13 that left Germany with the euro area’s only stable AAA grade. S&P warned that crisis-fighting efforts are still falling short. While Finland, the Netherlands and Luxembourg kept their AAA grades, they were put on negative outlook. Spain and Italy were also among the nine nations downgraded.

“The fallout from Europe will guide currency markets, but I think the carnage in the Aussie might be fairly limited,” said Besa Deda, chief economist at St. George Bank Ltd.

Aussie Dollar Forecasts

The Australian currency will find support near the $1.0210 level with bargain hunters stepping in to buy the currency on declines toward that level, she said.

Australia’s dollar will this year rise to within 1 U.S. cent of its record high of $1.1081 according to Credit Agricole CIB, the currency’s most-accurate forecaster.

The world’s fifth most-traded currency will rise to $1.10 by Dec. 31 as China’s demand for Australian commodities reduces the Reserve Bank’s need to cut interest rates, according to Credit Agricole, which had the lowest margin of error in forecasting the currency’s movement as measured by Bloomberg Rankings over the past two quarters.

The median forecast of 37 firms tracked by Bloomberg News is for the Aussie to fall to $1.

“If we’re right in a gradual global recovery and China having a soft landing, commodities should remain resilient and that will be good for the Aussie dollar,” said Mitul Kotecha, Credit Agricole’s Hong Kong-based head of global currency strategy. “The market is too dovish on rates and when we see a correction on rates, the Aussie dollar will benefit.”

The extra yield Australia’s 10-year bond offers over U.S. Treasuries will be 1.9 percentage points by year-end, compared with the past decade’s average of 1.56, a separate survey shows.

Home Loans

Australian home-loan approvals rose in November for an eighth straight month as buyers responded to a lowering of interest rates by the central bank.

The number of loans granted to build or buy houses and apartments gained 1.4 percent from October, when they rose a revised 0.8 percent, the statistics bureau said today. The median estimate in a Bloomberg News survey of economists was for a 1 percent increase in approvals.

Australia’s benchmark 10-year bond yield dropped 17 basis points, or 0.17 percentage point, to 3.67 percent. It is poised for its biggest one-day decline since Sept. 5. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell nine basis points to 2.81 percent.

--Editors: Benjamin Purvis, Naoto Hosoda

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net


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