Bloomberg News

Aussie Drops Versus Yen as Spanish Yields Spur Debt Woes

June 20, 2012

Australia’s dollar halted a two-day advance against the yen as rising borrowing costs in Spain renewed fears that Europe’s debt crisis is deepening.

The so-called Aussie failed to extend a four-day gain versus the dollar before Spain sells bonds tomorrow. The Federal Open Market Committee will conclude a meeting today, amid speculation policy makers will signal additional measures to support U.S. growth. New Zealand’s currency, nicknamed the kiwi, fell against its U.S. and Japanese counterparts after data showed the nation’s current-account deficit widened more than economists estimated.

“I can’t see that the European developments are turning in a very positive direction,” said Thomas Harr, the Singapore- based head of Asian foreign-exchange strategy at Standard Chartered Plc. In currencies such as the Aussie and kiwi “I don’t think you will see a sustained risk rally,” he said.

The Australian dollar slid 0.1 percent to 80.35 yen as of 3:47 p.m. in Sydney. It was little changed at $1.0185 from yesterday, when it climbed to $1.0201, the strongest level since May 8. The kiwi dropped 0.4 percent to 79.52 U.S. cents, and fell 0.5 percent to 62.73 yen.

Australia’s 10-year bond yield rose 11 basis points, or 0.11 percentage point, to 3.09 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose 2 1/2 basis points to 2.7 percent.

Yields Climb

Spanish 10-year yields were at 7.04 percent yesterday. Greece, Ireland and Portugal sought bailouts when their benchmark borrowing costs topped 7 percent. Spain is scheduled to sell bonds due in 2014, 2015 and 2017 tomorrow.

Fed policy makers will review new forecasts as they continue a two-day meeting today. A survey of 21 primary dealers who trade with the U.S. central bank showed 12 expect some form of added stimulus, while 9 expect no action.

“The market has built in strong expectations for some sort of policy action from the FOMC,” said Andrew Salter, a strategist at Australia & New Zealand Banking Group Ltd. (ANZ) in Sydney. “If we get some sort of flag by the Federal Reserve to additional purchases, then that would be a positive for the Aussie.”

The Australian dollar has declined 0.7 percent in the past three months, Bloomberg Correlation Weighted Indexes show. Its New Zealand counterpart has fallen 0.6 percent, according to the gauge, which tracks 10 developed-nation currencies.

A report today by Statistics New Zealand showed the nation’s current-account shortfall was 4.8 percent of gross domestic product in the year ended March 31. That compares with the 4.6 percent forecast in a Bloomberg News survey of 10 economists.

To contact the reporter on this story: Kristine Aquino in Singapore at

To contact the editor responsible for this story: Rocky Swift at

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