Bloomberg News

Aussie, N.Z. Dollars Fall on Chinese Growth, Euro-Region Concern

September 24, 2012

Australia’s dollar fell against its U.S. peer as speculation slowing economic growth in China, the South Pacific nation’s biggest trading partner, damped demand for higher-yielding assets.

The Aussie dropped against the majority of its 16 most- traded counterparts as China’s Economic Information Daily said downward pressure on the Asian nation’s economy was increasing. The New Zealand dollar declined against all major currencies on speculation that disagreement among the euro region’s leaders is curbing prospects for growth.

“The big question for the Reserve Bank of Australia is, do they fight the currency risk by cutting rates and cheapening the currency, or do they embrace it and get the benefits of that?” James Rickards, senior managing director of Tangent Capital Partners, said in an interview on Bloomberg Television’s “Lunch Money” with Dominic Chu. “My sense so far is that they’re actually going to embrace the strong currency. This is probably a good buying opportunity.”

Australia’s currency depreciated 0.3 percent to $1.0425 yesterday in New York after earlier falling as much as 0.7 percent. It decreased 0.7 percent to 81.16 yen.

New Zealand’s dollar, nicknamed the kiwi, declined 0.8 percent to 82.29 U.S. cents after earlier falling 1.3 percent, its biggest drop since July 23. The kiwi slipped 1.1 percent to 64.06 yen.

RBA policy makers are set to meet on Oct. 2. Swaps indicate an 83 percent chance of a quarter percentage point cut at the meeting, according to data compiled by Bloomberg. Five of 20 economists surveyed by Bloomberg News also predict a reduction.

Europe, China

Central-bank Governor Glenn Stevens lowered the overnight cash rate target by a total of 1.25 percentage points to 3.5 percent from November to June to help shield the economy from Europe’s debt crisis and slower growth in China. In minutes of its Sept. 4 meeting released Sept. 18, the RBA signaled scope to reduce rates should the outlook for the economy deteriorate significantly.

New Zealand’s dollar has strengthened 3.6 percent this year, the biggest increase among the 10 developed-nation currencies on the Bloomberg Correlation-Weighted Indexes. The Aussie has fallen 0.4 percent and the greenback is down 2.7 percent.

To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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