Bloomberg News

Aussie Falls, Bonds Gain as Europe Concern Curbs Risk Bid

September 26, 2012

The Australian dollar fell to a two-week low and domestic bonds advanced as concern political clashes are hampering attempts to resolve Europe’s debt crisis sapped demand for riskier assets.

The so-called Aussie touched the weakest in almost three weeks against the yen after Artur Mas, the president of Catalonia, called early elections and said Spain’s richest region should seek “self-determination.” The country’s Prime Minister Mariano Rajoy is struggling to persuade his compatriots to accept the deepest austerity measures on record. New Zealand’s dollar declined after the nation posted a trade deficit that was bigger than economists estimated.

“What’s happening in Europe has made investors nervous, and they want to take risk off the table,” said Hans Kunnen, chief economist at St. George Bank Ltd. in Sydney. “News out of Europe was unsettling and doesn’t provide a positive outlook. Investors reacted to that by selling off equities and selling off the Aussie dollar.”

The Australian currency fell to $1.0342, the weakest since Sept. 11, before trading at $1.0345 at 4:42 p.m. in Sydney, 0.4 percent below yesterday’s close. It slid 0.5 percent to 80.43 yen after earlier touching 80.38 yen, the lowest since Sept. 6.

Australia’s government bonds advanced, pushing the yield on the 10-year security down by as much as 11 basis points, or 0.11 percentage point, to 3.05 percent, the lowest since Sept. 6. Yields on the two-year government note touched 2.51 percent, the lowest since July 27.

The Aussie dollar has weakened 2 percent in the past month, the worst performance among 10 currencies tracked by Bloomberg Correlation-Weighted Indexes. New Zealand’s currency fell 0.3 percent over the same period.

N.Z. Trade

The so-called kiwi dropped against most of its 16 major peers, including a 0.3 percent drop to 81.95 U.S. cents and a 0.3 percent slide to 63.72 yen, after falling to as low as 63.63 yen, the weakest level since Sept. 12.

A report from New Zealand’s statistics office showed imports exceeded exports by NZ$866 million ($710 million) in the 12 months through August, compared with a revised NZ$768 million in the year ended July 31.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose three basis points to 2.68 percent.

The MSCI Asia Pacific Index (MXAP) of stocks fell 1.4 percent, following yesterday’s 1.1 percent decline in the Standard & Poor’s 500 Index.

Losses in the kiwi were limited after Auckland-based Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, said it increased full-year earnings amid record flows of milk from its New Zealand suppliers.

Barclays Plc revised its forecasts for the New Zealand and Australian dollars and now expects the kiwi to rise to 84 U.S. cents and the Aussie to $1.06 in the coming month. It previously predicted a rise to 83 U.S. cents and to $1.05 respectively.

To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net

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


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