New Zealand, Aussie Dollars Fall as European Debt Concern Saps Risk Bid

Australia’s and New Zealand’s dollars dropped against their U.S. counterpart as stocks and commodities weakened after Italy’s borrowing cost increased at a bond sale, discouraging demand for higher-yielding assets.

The New Zealand dollar climbed earlier after a government report showed retail sales increased by the most since 2006, adding to signs the domestic economy remains resilient. The South Pacific currencies advanced on Nov. 11 on speculation new governments in Italy and Greece would implement further austerity measures.

“We had a sharp rally in risk and equities on Friday, and some of that’s being unwound today,” said John McCarthy, managing director of currency trading at ING Groep NV in New York. “The market is focusing on Europe.”

The New Zealand dollar dropped 1 percent to 77.73 U.S. cents at 1:03 p.m. in New York after earlier rising as much as 1 percent and climbing 1 percent Nov. 11. Australia’s dollar weakened 1 percent to $1.0170 after rising 1.2 percent Nov. 11.

The MSCI World Index lost 1.1 percent, and the Thomson Reuters/Jefferies CRB Index of raw materials fell 0.8 percent.

New Zealand’s retail sales adjusted for inflation surged 2.2 percent in the third quarter, the government statistics office said today. The gain is more than three times the 0.6 percent median estimate of 12 economists in a Bloomberg News survey and is the largest since the fourth quarter of 2006.

The Reserve Bank of Australia will release tomorrow minutes of its Nov. 1 meeting, when the central bank cut the benchmark interest rate by a quarter-percentage point to 4.50 percent.

Italy’s Treasury auctioned 3 billion euros ($4.1 billion) of September 2016 notes, the maximum target. The yield was 6.29 percent, up from 5.32 percent at the previous auction and the highest since June 1997. Demand rose to 1.47 times the amount on offer, from 1.34 times last month.

To contact the reporters on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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