Bloomberg News

Aussie, N.Z. Dollars Decline Before PMIs in Europe, China

August 22, 2012

The Australian and New Zealand dollars fell before reports that may show global manufacturing is struggling to recover, weighing on risk appetite.

The currencies slid versus most of their major peers as Asian stocks declined ahead of purchasing managers indexes due tomorrow in Europe and China. The so-called Aussie and kiwi ended two-day gains against the greenback before the Federal Reserve releases minutes of its latest policy meeting. Australia’s dollar touched a one-month low against the euro before discussions this week between Europe’s leaders amid speculation they can agree on ways to contain their debt crisis.

“We think the markets are prone to a bit of disappointment,” said Gavin Stacey, chief rate strategist in Sydney at Barclays Plc. “To date, we’ve not seen too much in the way of policy stimulus actually turning around some of these leading indicators.”

Australia’s currency declined 0.5 percent to $1.0436 as of 4 p.m. in Sydney after climbing 0.4 percent to $1.0487 yesterday. It dropped 0.5 percent to 82.73 yen.

The New Zealand dollar slid 0.4 percent to 80.81 U.S. cents, following a 0.3 percent gain yesterday. The kiwi fell 0.4 percent to 64.06 yen.

The MSCI Asia Pacific Index of stocks slid 0.5 percent.

Manufacturing Indexes

Tomorrow’s purchasing managers reports are predicted to show continued contraction in German and French manufacturing, with the measure for the euro-area as a whole forecast to indicate a shrinkage for a 13th-straight month, according to surveys conducted by Bloomberg News. A report on Chinese manufacturing from HSBC Holdings Plc is also due.

An Australian index of leading economic indicators advanced in June, according to a separate report today. The index, a gauge of future economic growth, increased 0.5 percent to 284 from 282.6 in May, Westpac Banking Corp. (WBC) and the Melbourne Institute said in a statement today.

In the U.S., the Fed is scheduled to release minutes today of its most recent policy meeting, at which it refrained from implementing a third round of so-called quantitative easing, or QE3, to stimulate the economy.

“There are recent comments out suggesting that quantitative easing in September from the Federal Reserve is looking less likely, and to our mind we think QE3 is unlikely before the U.S. election,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest- rate risk-management company. “We may well see a bit of dollar strength on the fact that that doesn’t happen, and a bit of the steam coming out of risk markets.”

The Federal Open Market Committee’s next policy decision is due Sept. 13.

Aussie-Euro

The Australian currency fell to its lowest level in a month against the euro before a series of meetings this week aimed at preserving the 17-nation bloc.

Luxembourg Prime Minister Jean-Claude Juncker, the head of the euro group of finance ministers, will visit Greece today for talks on the indebted nation’s fiscal adjustment program. German Chancellor Angela Merkel and French President Francois Hollande meet in Berlin tomorrow to discuss the debt crisis, and both are set to talk separately with Greek Prime Minister Antonis Samaras later in the week.

“The darker side of the Aussie at the moment is the deterioration on a number of crosses,” said Robert Rennie, chief currency strategist at Westpac Banking Corp. in Sydney. “I’ve been downbeat on Aussie-euro for some time now, and I think that story continues.”

The Aussie fell 0.4 percent to 83.76 euro cents after earlier dropping as low as 83.70, the weakest since July 17.

The yield on 10-year Australian government bonds fell by eight basis points, or 0.08 percentage point, to 3.37 percent.

To contact the reporter on this story: Benjamin Purvis in Sydney at bpurvis@bloomberg.net

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


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