Bloomberg News

Aussie Falls Below Parity Versus Greenback on Greece

May 14, 2012

The Australian dollar declined below parity with its U.S. counterpart for the first time this year amid concern that Greece will leave the euro bloc, curbing demand for higher-yielding currencies.

Australia’s bond yields fell to records as Greek President Karolos Papoulias is set to continue talks with political party leaders today on forming a national unity government and Asian stocks dropped for a fourth day. Demand for the Australian and New Zealand currencies was supported after China cut the amount of cash banks must set aside as reserves to stimulate growth, brightening the export outlook for the South Pacific nations.

“Greece’s exit from the euro is becoming more and more a mainstream discussion, and this is potentially destabilizing for markets,” said Emma Lawson, a currency strategist in Sydney at National Australia Bank Ltd. “In this generally risk-off environment the risk is to the downside in the Aussie,”

Australia’s dollar fell to 99.80 U.S. cents, the lowest since Dec. 20, before trading at 99.87 cents as of 5:42 p.m. in Sydney, from $1.0020 on May 11. It slid 0.2 percent to 79.95 yen from last week, when it lost 1.5 percent. New Zealand’s currency declined 0.5 percent to 77.91 U.S. cents and dropped 0.3 percent to 62.35 yen.

Australia’s bonds rose, pushing 10-, 15- and three-year yields to record lows. The 10-year rate dropped as much as five basis points to 3.238 percent, while the 15-year yield touched 3.573 percent and the three-year rate fell to 2.586 percent.

The MSCI Asia Pacific Index of shares lost 0.6 percent.

Greek Politics

Meetings brokered by Greece’s Papoulias are set to continue after Syriza, the largest anti-bailout party, rejected a unity government following last week’s inconclusive elections. Greece may face new national elections unless a government is formed.

Futures traders decreased their bets that the Australian dollar will gain against the U.S. currency, figures from the Washington-based Commodity Futures Trading Commission show.

The difference in the number of wagers by hedge funds and other large speculators on an advance in the Australian dollar compared with those on a drop -- so-called net longs -- was 25,104 on May 8, the least since November, and compared with net longs of 52,280 a week earlier.

The Aussie has lost 5 percent in the past three months, the worst performer among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The New Zealand dollar is second worst, with a 4.9 percent slide.

Worst Performers

Australia’s dollar halted three weeks of declines versus the yen after the People’s Bank of China said May 12 that reserve ratios will fall 50 basis points, effective May 18. That was the third reduction in six months. China is Australia’s biggest trading partner and New Zealand’s second-largest export destination.

China’s reserve ratio cut “provided some support to the Aussie,” said Lawson. “But I think broader global concerns around Europe are probably a stronger driver for today.”

Losses in the Aussie were also limited after data showed the nation’s home approvals unexpectedly rebounded in March, rising for the first time in three months.

The number of loans granted to build or buy houses and apartments gained 0.3 percent from February, when they fell 2.5 percent, the statistics bureau said in Sydney today. The median estimate in a Bloomberg News survey of economists was for a 2 percent decline in approvals.

To contact the reporter on this story: Monami Yui in Tokyo at myui1@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net


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