The Australian dollar fell for a second day against the yen after data showed consumer confidence was little changed from a two-month low, underscoring concern the South Pacific nation’s economy is weakening.
The so-called Aussie slid versus most of its 16 major counterparts after the World Bank cut its global growth forecast for this year, tempering demand for higher-yielding assets. Australia’s bonds advanced for a third day. The New Zealand dollar, known as the kiwi, dropped versus its Japanese peer as Asian stocks declined.
“We’ve seen over the last week that domestic data hasn’t been that good and the Aussie’s taken perhaps a slight hit,” said Derek Mumford, a Sydney-based director at Rochford Capital, a currency risk-management company. “I wouldn’t say today’s data reflects any kind of booming confidence.”
Australia’s dollar fell 1 percent to 92.86 yen as of 4:50 p.m. in Sydney. It lost 0.2 percent to $1.0549. New Zealand’s currency bought 73.87 yen, 0.9 percent below the close in New York. It traded at 83.93 U.S. cents from 83.97 yesterday.
Ten-year yields in Australia dropped to as low as 3.36 percent, the lowest since Jan. 3. The MSCI Asia Pacific Index of shares lost 0.8 percent.
Australia’s sentiment index for January rose 0.6 percent to 100.6, a Westpac Banking Corp. and Melbourne Institute survey taken Jan. 7-13 of 1,200 adults showed today in Sydney. This month’s figure was little changed from the 100.03 level in December that was the least since October. Readings above 100 indicate optimists outnumbered pessimists.
The Washington-based World Bank projects the global economy will expand 2.4 percent, down from a June forecast of 3 percent, after growing 2.3 percent in 2012. It halved its forecast for Japan, cut the U.S. projection by 0.5 percentage point and predicted a second year of contraction in the euro region.
Expected price swings in the Aussie are increasing after dropping to a 16-year low in December. Implied one-month volatility on the Aussie climbed to 7.03 percent yesterday, the most since Nov. 19. Higher volatility means the price of an asset may vary dramatically in a short period, increasing the potential for losses.
“Even though the Aussie is relatively strong in the near term, I think the risks are to the downside,” Rochford Capital’s Mumford said.
Commonwealth Bank of Australia (CBA), the nation’s largest lender, raised its forecasts for the Aussie and kiwi, citing “a firming global economy and softer U.S. dollar” in a report today by analysts led by Chief Currency Strategist Richard Grace in Sydney.
The Australian dollar will rise to $1.07 by mid-year and will be at $1.08 by Dec. 31, up from an earlier estimate of $1.04 for both time periods. Its New Zealand counterpart will climb to 87 U.S. cents by year-end, compared with a previous projection of 82.
New Zealand’s currency gained versus more than half of its 16 major counterparts after a central bank report showed the proportion of government bonds held by international investors climbed last month to 64 percent from 62.7 percent in November, the highest since June 2010.
The yield on the nation’s 10-year debt was little changed at 3.50 percent. The two-year swap rate, a fixed payment made to receive floating rates which is sensitive to rate expectations, declined one basis point to 2.81 percent.
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