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Aussie Falls as Signs of Global Slowdown Curb Risk Demand

Australia’s dollar fell against 14 of its 16 major counterparts as signs of a global economic slowdown sapped demand for higher-yielding currencies.

The New Zealand dollar extended last week’s decline versus the yen after a report today showed Japan’s economy grew less than forecast, adding to signs of a worldwide slump. Data tomorrow may show the euro-area economy contracted during the second quarter. Demand for the so-called Aussie dollar was supported as futures traders increased bets that it will gain.

“Uncertainty over the global economic outlook is certainly a concern for growth-related currencies,” said Kengo Suzuki, a foreign-exchange strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest bank by market value. There are risks the Australian and New Zealand dollars will fall, he said.

Australia’s currency dropped to $1.0546 at 4:45 p.m. in Sydney, 0.3 percent below the close in New York last week. It lost 0.3 percent to 82.57 yen. The New Zealand dollar, known as the kiwi, slid 0.4 percent to 81.04 U.S. cents and 0.3 percent to 63.46 yen.

The yield on 10-year government bonds in Australia climbed one basis point, or 0.01 percentage point, to 3.26 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was little changed at 2.685 percent.

Slowing Growth

Japan’s economy grew at an annualized 1.4 percent pace in the three months through June, government data showed today. That was less than the 2.3 percent predicted in a Bloomberg News survey of economists and slower than the revised rate of 5.5 percent for the first quarter.

Gross domestic product in the 17-nation euro region probably declined 0.2 percent in the second quarter compared with zero growth in the previous three-month period, according to a separate survey.

The correlation between the South Pacific currencies and global stocks has fallen from a record high, according to data compiled by Bloomberg, and the relationship to commodities is also fading as investors search for faster growth and higher interest rates.

Australia’s and New Zealand’s currencies have historically risen or fallen along with the prices of the commodities the nations export, and with investor appetite for volatile assets.

Correlation Breakdown

Rolling correlations over 60 days between the Aussie-U.S. dollar pair and the MSCI World Index of stocks was 0.77, down from a record 0.96 on Jan. 18. The New Zealand-U.S. dollar link to global stocks has fallen to 0.72 from a Jan. 9 record of 0.91. A value of 1 indicates the assets move in unison.

The Australian and New Zealand dollars are this year’s best-performing currencies among developed economies, even as raw material prices have stagnated. The Aussie is up 3.5 percent this year and the kiwi has risen 4.6 percent among the 10 developed-nation currencies tracked by Bloomberg Correlation- Weighted Indexes.

The Thomson Reuters/Jefferies CRB Index of raw materials has fallen 1.1 percent since the end of 2011.

The Australian and New Zealand central banks have kept their benchmark interest rates at 3.5 percent and 2.5 percent respectively, at least 2 percentage points higher than the U.S. and U.K., attracting investors to the South Pacific nations’ higher-yielding assets.

The difference in the number of wagers by hedge funds and other large speculators on an advance in the Australian dollar compared with those on a drop -- so-called net longs -- was 52,894 on Aug. 7, compared with net longs of 37,235 a week earlier, figures from the Washington-based Commodity Futures Trading Commission showed.

To contact the reporters on this story: Monami Yui in Tokyo at myui1@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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