Bloomberg News

Aussie Near 2012 Low Amid Concern Greece May Leave Euro

May 15, 2012

Australia’s dollar traded close to its weakest level this year as Greece’s failure to form a new government spurred speculation it may leave the euro area, sapping demand for riskier assets.

The so-called Aussie was near a four-month low against the yen as Asian stocks fell for a sixth-straight day, extending a global equities rout. The New Zealand dollar maintained three days of losses after Auckland-based Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, said whole-milk powder prices continued their slide, falling to the lowest level in more than 2 1/2 years.

“It’s just a general bout of risk aversion around the globe,” said Derek Mumford, a director in Sydney at Rochford Capital, a currency risk management company. “It’s not just Greece, it’s the whole European situation. The Aussie is certainly under pressure.”

Australia’s dollar traded at 99.46 U.S. cents as of 10:53 a.m. in Sydney from 99.37 in New York yesterday, when it slid as low as 99.22, the weakest since Dec. 20. The currency bought 79.94 yen from 79.67 yesterday when it touched 79.39, the lowest since Jan. 17. The New Zealand dollar bought 76.92 U.S. cents, having declined 0.9 percent to 76.93 cents yesterday. It was at 61.83 yen from 61.68.

Mumford predicts the Australian currency will drop as low as 97.50 U.S. cents within the next couple of weeks.

Greek Election

The MSCI Asia Pacific Index (MXAP) of stocks dropped 0.6 percent today. The MSCI World Index of developed market shares fell 0.9 percent yesterday.

Greek leaders will seek agreement today on an interim government that will schedule new elections as early as June 10, after President Karolos Papoulias failed to broker a governing coalition in meetings yesterday.

The new election will follow an inconclusive May 6 vote that pushed a political party opposed to Greece’s international bailout into second place. Public opinion polls say that party, Syriza, may come in first next time, complicating Greece’s efforts to avoid running out of cash by early July.

Elsewhere in Europe, investor concern over Spain’s ability to reduce its budget shortfall has increased since Prime Minister Mariano Rajoy announced in March that the country will miss a 2012 deficit goal set by the European Union. Spanish 10- year yields this week climbed as high as 6.36 percent, the most since Nov. 30.

Milk Prices

In New Zealand, Fonterra said milk powder for July delivery fell 9.6 percent from the May 1 sale to the lowest price since August 2009, according to a trade-weighted index. The near-term contract fell for the 11th straight auction to $2,488 a metric ton, the company said on its GlobalDairyTrade website.

The results “only add to the evidence suggesting next season’s Fonterra dairy payout will be considerably lower than the season just ending,” Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington, wrote in a research note.

Demand for Australia’s currency was also limited after a private survey showed the nation’s consumer confidence was little changed near the lowest level this year as concern about the global outlook countered the boost provided by this month’s decision by the country’s central bank to lower borrowing costs.

The sentiment index for May rose 0.8 percent to 95.3, a Westpac Banking Corp. (WBC) and Melbourne Institute survey taken May 7-11 of 1,200 consumers showed today in Sydney. From a year earlier, confidence is down 8.3 percent.

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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