Bloomberg News

Australian, N.Z. Dollars Drop After Moody’s Cuts Europe Ratings

February 14, 2012

Feb. 14 (Bloomberg) -- The Australian and New Zealand dollars weakened after Moody’s Investors Service cut the credit ratings on six European nations including Italy, Spain and Portugal, curbing demand for riskier assets.

The Aussie declined against most of its major peers before euro-area finance chiefs meet in Brussels tomorrow to discuss a second round of aid for Greece. Losses in the South Pacific nations’ currencies extended after U.S. retail sales climbed slower than forecast in January.

“Moody’s decision brings into focus what’s happening to the euro zone is still a worry,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “It’s still not a done deal in Greece. They still need to talk to the troika and there’s still a lot of uncertainty ahead. Aussie and kiwi are under pressure.”

Australia’s currency slid 0.4 percent to $1.0689 at 12:06 p.m. New York time, after strengthening 0.6 percent yesterday. The Aussie dropped as much as 0.6 percent versus the yen, before erasing losses to trade 0.6 percent stronger at 83.77 after the central Bank of Japan announced an expanded monetary easing program.

New Zealand’s currency, known as the kiwi, dropped 0.2 percent to 83.23 U.S. cents. It fetched 65.22 yen, 0.8 percent higher.

Moody’s cut the rating of Spain to A3 from A1, Italy to A3 from A2 and Portugal to Ba3 from Ba2, giving all three a negative outlook. The ratings firm also cut the grades of Slovakia, Slovenia and Malta, and revised its outlook on the Aaa rankings of the U.K., France and Austria to negative.

Greek Austerity

Germany and the European Commission yesterday welcomed Greece’s approval of the austerity steps demanded for a financial lifeline before ministers meet in Brussels tomorrow. The commission is a member, along with the European Central Bank and the International Monetary Fund, of the so-called troika of international creditors assessing Greece’s program.

The South Pacific nations’ currencies erased losses against the yen after Bank of Japan Governor Masaaki Shirakawa’s board unexpectedly expanded its monetary easing program to 65 trillion yen ($835 billion) from 55 trillion yen, including a credit-loan facility, and set a price stability goal of 1 percent inflation.

An index of Australian business confidence rose to 4 in January from 3 the previous month, according to National Australia Bank Ltd., which released the results of its survey of about 550 companies in Sydney today.

Rugby World Cup

New Zealand’s retail sales adjusted for inflation are predicted to have risen 1.2 percent in the fourth quarter, according to the median estimate of economists surveyed by Bloomberg before the statistics bureau data tomorrow.

“The kiwi retail figures will show impact from the Rugby World Cup and will likely boost the kiwi,” Jeremy Jukes, a foreign-exchange dealer in Auckland at Velocity Trade Ltd., a currency brokerage, said referring to the seven-week tournament held in September and October. “If we get good retail sales out of the States as well, we’ll likely see equities move higher, which will mean risk currencies will benefit.”

--With assistance from Allison Bennett in New York. Editor: 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: Dave Liedtka at dliedtka@bloomberg.net


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