Bloomberg News

Aussie Near 3-Week Low as Stocks Fall on Global Slowdown Concern

November 16, 2012

Australia’s dollar was 0.1 percent from a three-week low as risk appetite waned after stocks fell globally yesterday amid mounting geopolitical tension over the Gaza strip and signs of economic slowdown worldwide.

The so-called Aussie held two days of losses after the International Monetary Fund said in a statement yesterday there is scope for the Reserve Bank of Australia to ease more if warranted by the economy. The RBA held its benchmark interest rate unchanged at 3.25 percent on Nov. 6. The Australian and New Zealand dollars headed for weekly gains against the yen on speculation Japanese elections next month will hand power to an opposition party that advocates more monetary stimulus.

“The pressure is still on the downside for the Aussie,” said Lee Wai Tuck, currency strategist at Forecast Pte in Singapore. “There are concerns about the global economy slowing and euro zone risks. The RBA is likely to open the door for more easing, if not in December, maybe next year in February.”

Australia’s dollar declined 0.1 percent to $1.0320 as of 6:13 p.m. in Sydney from yesterday, when it touched $1.0307, the lowest since Oct. 26. The Aussie fell 0.3 percent to 83.60 yen. It was poised for a 1.3 percent advance against the Japanese currency this week.

New Zealand’s currency was little changed at 80.97 U.S. cents, headed for a 0.5 percent weekly slide. The so-called kiwi slipped 0.1 percent to 65.60 yen, paring this week’s climb to 1.4 percent.

Stocks, Gaza

The MSCI Asia Pacific excluding Japan Index of stocks fell 0.3 percent. The MSCI World Index (MXWO) fell for a seventh day yesterday, losing 0.3 percent.

Israel’s Defense Minister Ehud Barak signaled yesterday that the country is ready to escalate its military operations against Gaza after at least one long-range missile was fired at Tel Aviv by Palestinian militants.

The euro-area economy succumbed to a recession for a second time in four years. Gross domestic product in the 17-nation bloc slipped 0.1 percent in the third quarter, after a 0.2 percent decline in the previous three months, the European Union’s statistics office in Luxembourg said yesterday.

“There was plenty of bearish news to depress markets,” Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp, wrote in a report today. “The skirmish between Israel and Hamas in the Gaza strip escalated. The euro zone officially entered recession.”

Japan, Singapore

In Asia, Japan and Singapore downgraded their economic outlooks today. Japan’s government cut its assessment of consumption, investment, corporate profits and the job market, as the country faces the risk of entering its third technical recession since 2008. Singapore’s Trade Ministry said in a statement the economy will grow 1 percent to 3 percent in 2013 after expanding about 1.5 percent this year, lower than the previous forecast of as much as 2.5 percent in 2012.

The RBA will release on Nov. 20 the minutes of its last meeting when policy makers left interest rates unchanged. Interest-rate swaps data compiled by Bloomberg show traders see a 72 percent chance the central bank will lower its benchmark to 3 percent next month.

Forecast’s Lee said he expects the Australian currency to drop to parity with the U.S. dollar by January.

Australian government bonds were little changed, with the 10-year debt yielding 3.03 percent.

Japan’s Election

The South Pacific nations’ currencies headed for weekly gains against the yen after Prime Minister Yoshihiko Noda dissolved parliament today for a general election on Dec. 16 that polls suggest he will lose.

Shinzo Abe, leader of Japan’s Liberal Democratic Party, leader of the main opposition Liberal Democratic Party, said yesterday the Bank of Japan should pursue unlimited monetary stimulus to end deflation and revive the economy.

“We’re seeing the yen-crosses being bought in a knee-jerk reaction to some comments calling for BOJ easing,” said Forecast’s Lee. “But if stock markets continue to fall, I think the yen will regain some of its losses.”

Australia’s dollar has lost 2.7 percent in the past three months, the second-worst performance tracked by Bloomberg Correlation-Weighted Currency indexes. The yen dropped 2.9 percent in the same period, while New Zealand’s currency fell 0.8 percent.

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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