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Kiwi Dollar Weakens on Europe Concern; Aussie Pares Decline on RBA Minutes

The New Zealand dollar declined for a second day as concern Europe will struggle to contain its sovereign-debt crisis sapped demand for riskier assets.

The so-called kiwi dollar fell versus all 16 major counterparts as Asian stocks slid. Australia’s dollar pared losses after the Reserve Bank said in minutes of its Nov. 1 meeting there was a case for keeping interest rates unchanged.

“The market is still very skeptical that the European problem can be solved any time soon,” said Thomas Averill, a director at the currency and interest-rate risk management company Rochford Capital in Sydney. “Skepticism within the European bond market followed through into general risk aversion. Aussie and kiwi remain vulnerable to the downside.”

New Zealand’s dollar declined 0.5 percent to 77.63 U.S. cents as of 12:31 p.m. Sydney time. The currency fell 0.5 percent to 59.82 yen. Australia’s dollar was little changed from yesterday at $1.0206 after earlier losing as much as 0.2 percent. It was unchanged at 78.65 yen.

The MSCI Asia Pacific Index of stocks dropped 0.6 percent after the MSCI World Index declined 0.9 percent yesterday.

Italy’s borrowing costs rose to a euro-era record at an auction of five-year notes yesterday. The yield was 6.29 percent, up from 5.32 percent at the previous auction and the highest since June 1997. Spain is scheduled raise as much as 7.5 billion euros ($10.2 billion) by selling bills and bonds this week.

While Australia’s central bank lowered its cash-rate target by 0.25 percentage point to 4.5 percent earlier this month, it said there had been a case for keeping borrowing costs unchanged to await the expansionary effects of high commodity prices and the resource investment boom, minutes released today showed.

“There’s no sign that there’s an urgent need to cut rates again, so I think we might see that priced out a little bit and that’s why the Aussie has jumped,” said Roland Randall, an economist at Toronto-Dominion Bank’s TD Securities unit in Singapore.

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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