The Australian and New Zealand dollars fell, snapping three-day gains versus their U.S. counterpart, on speculation policy makers meeting this week will signal they’re in no hurry to increase interest rates.
Australia’s currency also dropped from near a two-week high versus the greenback on concern a sovereign-debt crisis in Europe will damp demand for higher-yielding assets. The euro region’s finance ministers meet today in Brussels. New Zealand’s dollar, nicknamed the kiwi, declined against most of its major counterparts as a government report showed the budget cash deficit was wider than earlier forecast.
“Kiwi and Aussie should drift lower into the rates decisions later this week,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “Attention may shift back to Europe and the evolving sovereign- debt crisis there. There’s still bubbling concerns about Portugal and to a lesser extent Spain.”
Australia’s dollar fell 0.5 percent to 98.84 U.S. cents at 12:07 p.m. in New York, from 99.31 cents on Dec. 3, when it climbed to 99.39 cents, the strongest since Nov. 22. The so- called Aussie was down 0.3 percent to 81.74 yen, from 81.97. New Zealand’s dollar dropped 0.7 percent to 76.03 cents, and fell 0.5 percent to 62.89 yen, from 63.22 yen.
Reserve Bank of Australia policy makers are projected to leave benchmark borrowing costs at 4.75 percent tomorrow, according to a Bloomberg News survey. New Zealand’s central bank will meet on Dec. 9 and keep its official cash rate at 3 percent, according to a separate survey.
Higher rates in Australia and New Zealand, compared with as low as zero in the U.S. and Japan, attract investors to the South Pacific nations’ assets. The risk in such trades is that currency market moves will erase profits.
Traders pared bets on rate increases in Australia after RBA Governor Glenn Stevens told lawmakers in testimony 10 days ago that “there’s unlikely to be anything from us imminently” on borrowing costs.
New Zealand’s cash deficit totaled NZ$7.45 billion ($5.7 billion) in the four months ended Oct. 31, or NZ$798 million more than forecast in May’s budget, the Treasury said in a statement today.
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