The Australian dollar reached a record high versus the euro as concern that Europe’s sovereign- debt crisis is worsening fueled speculation the South Pacific currency is attracting investors away from European assets.
The Aussie and New Zealand dollars snapped four-day gains against their U.S. counterpart amid bets that a slowdown in Europe will weigh on growth prospects for the global economy. New Zealand’s currency, called the kiwi, failed to extend a two- day gain versus the yen after a European report showed inflation in the region slowed and Italy’s biggest bank said it needs to raise more capital.
“The Aussie will not suffer as much this year on risk selloffs, as it’s moving away from being a high-yield risk play to becoming a safer alternative to Europe,” said Jesper Bargmann, regional head of spot trading for major currencies in Singapore at Royal Bank of Scotland Plc. He prefers to hold the Australian dollar against the euro, he said.
Australia’s currency strengthened as much as 0.7 percent to touch 80.10 euro cents today, its strongest ever, before trading at 80.05 cents at 12:45 p.m. New York time.
The Aussie fell 0.2 percent to $1.0355 in its first decline in five days. It retreated 0.3 percent to 79.40 yen. The New Zealand dollar lost 0.3 percent to 78.75 U.S. cents and depreciated 0.4 percent to 60.37 yen in its first loss versus the Japanese currency in three days.
Milan-based UniCredit SpA said it will sell new shares in a 7.5 billion-euro ($9.8 billion) offer to strengthen its capital position. European inflation slowed to 2.8 percent for December from a three-year high of 3 percent the prior month, the European Union statistics office said.
“As long as the outlook for the euro area is hazy, I don’t think markets will be totally in a risk-on sentiment,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp., a currency-margin company. “The Aussie and kiwi are likely to be sold when the euro is weak.”
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