Australian, N.Z. Dollars Poised for Monthly Drop on Signs Growth Slowing
The Australian and New Zealand currencies are headed for monthly declines against both the dollar and the yen on signs the global economy is slowing.
The so-called Aussie was poised for a fourth month of losses versus the yen and has lost 3.5 percent against the dollar since it reached a record last month. New Zealand’s currency is set for its first monthly drop in six months against the greenback after a survey by ANZ National Bank Ltd. showed business confidence declined in August.
“World growth is slowing and that is going to be an overall drag on commodity currencies and equity markets,” said Tony Allen, global head of foreign-exchange trading in Sydney at Australia & New Zealand Banking Group Ltd.
Australia’s dollar declined to 81.93 yen as of 4:24 p.m. in Sydney from 81.98 yen in New York yesterday, headed for a 2.9 percent monthly drop. The currency fetched $1.0692 from $1.0683 yesterday. It reached a record $1.1081 on July 27.
New Zealand’s dollar was unchanged from yesterday at 65.46 yen and has lost 3.1 percent this month. It traded at 85.44 U.S. cents from 85.31 yesterday and 87.93 on July 29.
N.Z. Business Confidence
A net 34.4 percent of companies surveyed in New Zealand expect the economy will improve over the next 12 months, down from 47.6 percent in July, according to the ANZ survey released today. The net figure subtracts the number of pessimists from the number of optimists.
The New Zealand dollar fell 1.9 percent in the past month against nine developed nation peers tracked by Bloomberg Correlation-Weighted Currency Indexes. Australia’s currency declined 1.8 percent.
If the New Zealand dollar “falls significantly from this level, it certainly is a buying opportunity,” said Roland Randall, senior strategist for rates and foreign exchange in Singapore at TD Securities Inc.
A report from the Reserve Bank of Australia today showed private lending increased 0.2 percent in July from the previous month, in line with the median estimate of 17 economists surveyed by Bloomberg News. Lending gained 2.7 percent from a year earlier, the central bank said.
Federal Reserve Policy
Declines in the Australian and New Zealand dollar were limited on prospects slowing jobs in the U.S. will increase pressure on the Federal Reserve to add stimulus, spurring demand for higher-yielding assets.
Companies in the U.S. probably added 100,000 workers to payrolls in August, less than July’s 114,000, economists predicted before data from ADP Employer Services today.
“Markets are still being held up by hopes that we are going to see further policy stimulus from the Federal Reserve,” said Sue Trinh, a senior currency strategist at Royal Bank of Canada. “It’s unlikely to see risk proxies pullback in a sharp manner.”
Benchmark rates are 4.75 percent in Australia and 2.5 percent in New Zealand, compared with as low as zero in the U.S. and Japan, attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.
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