Aussie Sets 2012 Low Amid Concern Greece May Leave Euro
Australia’s dollar declined to the weakest level this year as Greece’s failure to form a new government spurred speculation it may leave the euro area, sapping demand for riskier assets.
The so-called Aussie was near a four-month low against the yen as Asian stocks fell for a sixth-straight day, extending a global equities rout. The New Zealand dollar dropped for a fourth day after Auckland-based Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, said whole-milk powder prices continued their slide, falling to the lowest level in more than 2 1/2 years.
“It’s just a general bout of risk aversion around the globe,” said Derek Mumford, a director in Sydney at Rochford Capital, a currency risk management company. “It’s not just Greece, it’s the whole European situation. The Aussie is certainly under pressure.”
Australia’s dollar touched 98.90 U.S. cents, the weakest since Dec. 19, before trading at 98.92 as of 4:22 p.m. in Sydney, 0.5 percent below the close in New York yesterday. The currency bought 79.50 yen from 79.67 yesterday, when it slid to 79.39, the lowest since Jan. 17.
Mumford predicts the Australian currency will drop as low as 97.50 U.S. cents within the next couple of weeks.
The New Zealand dollar lost 0.5 percent to 76.56 U.S. cents, after sliding to 76.48, the least since Dec. 20. It was at 61.52 yen from 61.69, after falling to as low as 61.49, the weakest since Jan. 19.
The MSCI Asia Pacific Index (MXAP) of stocks dropped 2.6 percent today. The MSCI World Index of developed market shares fell 0.9 percent yesterday.
Greek leaders will seek agreement today on an interim government that will schedule new elections as early as June 10, after President Karolos Papoulias failed to broker a governing coalition in meetings yesterday.
The new election will follow an inconclusive May 6 vote that boosted a political party opposed to Greece’s international bailout into second place. Public opinion polls say that party, Syriza, may come in first next time, complicating Greece’s efforts to avoid running out of cash by early July.
Elsewhere in Europe, investor concern over Spain’s ability to reduce its budget shortfall has increased since Prime Minister Mariano Rajoy announced in March that the country will miss a 2012 deficit goal set by the European Union. Spanish 10- year yields this week climbed as high as 6.36 percent, the most since Nov. 30.
In New Zealand, Fonterra said milk powder for July delivery fell 9.6 percent from the May 1 sale to the lowest price since August 2009, according to a trade-weighted index. The near-term contract fell for the 11th straight auction to $2,488 a metric ton, the company said on its GlobalDairyTrade website.
The results “only add to the evidence suggesting next season’s Fonterra dairy payout will be considerably lower than the season just ending,” Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington, wrote in a research note.
Demand for Australia’s currency was also limited after a private survey showed the nation’s consumer confidence was little changed near the lowest level this year as concern about the global outlook countered the boost provided by this month’s decision by the country’s central bank to lower borrowing costs.
The sentiment index for May rose 0.8 percent to 95.3, a Westpac Banking Corp. (WBC) and Melbourne Institute survey taken May 7-11 of 1,200 consumers showed today in Sydney. From a year earlier, confidence is down 8.3 percent.
Yields on Australia’s benchmark 10-year notes slid three basis points, or 0.03 percentage point, to 3.23 percent today. The rate touched a record low of 3.201 percent yesterday. Three- year yields fell four basis points today to 2.56 percent.
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