Aussie, N.Z. Dollars Fall on Europe Stalemate, Before RBA
The Australian and New Zealand dollars declined on speculation disagreement among the euro region’s leaders on debt-crisis solutions is curbing prospects for growth, damping demand for higher-yielding assets.
The so-called Aussie and kiwi declined against most of their major peers before data today forecast to show German business confidence stayed near the lowest in more than two years. Greece and representatives of its so-called troika of international creditors agreed to take a break from inconclusive aid talks. The Reserve Bank of Australia will hold a policy meeting next week.
“What could move markets would be some friction news on the Greek-troika inspections,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp. (WBC), Australia’s second-largest lender. “Aussie is seeing a bit of slippage on the possibility of the RBA cutting rates as early as October.”
The Australian dollar fell 0.4 percent to $1.0415 as of 4:45 p.m. in Sydney. It declined 0.6 percent to 81.28 yen. The New Zealand dollar dropped 0.6 percent to 82.39 U.S. cents and lost 0.7 percent to 64.32 yen.
The MSCI Asia Pacific Index (MXAP) of regional shares slid 0.3 percent.
The Ifo institute will probably say its German business climate index, based on a survey of 7,000 executives, was at 102.5 this month from 102.3 in August, according to the median estimate of economists surveyed by Bloomberg News before the data today. August’s reading was the lowest since March 2010.
The International Monetary Fund, the European Central Bank and the European Commission said in a joint statement on Sept. 21 that their mission to Athens for financial talks will take a “brief pause” and “expects to return to Athens after about a week.”
RBA policy makers are set to meet on Oct. 2. Swaps indicate an 83 percent chance of a quarter percentage point cut at the meeting, according to data compiled by Bloomberg. Five of 20 economists surveyed by Bloomberg News also predict a reduction.
Central bank Governor Glenn Stevens lowered the overnight cash rate target by a total of 1.25 percentage points from November to June to help shield the economy from Europe’s debt crisis and slower growth in China. In minutes of its Sept. 4 meeting released Sept. 18, the RBA signaled scope to reduce rates should the outlook for the economy deteriorate significantly.
“Swings in sentiment towards the likelihood of the RBA cutting rates when it next meets on Oct. 2 are likely to be the major direct influence on the AUD,” Ray Attrill, global co-head of foreign-exchange strategy at National Australia Bank Ltd. in Sydney, wrote in a report today.
Australia’s dollar has weakened 1.6 percent in the past month, the worst performance after its U.S. peer among 10 currencies tracked by Bloomberg Correlation-Weighted Indexes. New Zealand’s dollar was little changed over the same period.
The Aussie dollar has weakened even as the Standard & Poor’s GSCI Index of commodities has risen almost 20 percent from its low this year in June. Its decline comes amid concern of a slowdown in China, Australia’s biggest trading partner.
Downward pressure on China’s economy is increasing, Economic Information Daily reported, citing the transcript of a speech by Zhang Ping, head of the National Development and Reform Commission. Europe’s debt problems are still at a “high risk” phase and the global economic recovery is “bumpy,” the newspaper cited Zhang as saying.
Australia’s government bonds advanced, pushing the yield on the 10-year security down by six basis points, or 0.06 percentage point, to 3.23 percent.
Australian Treasurer Wayne Swan said the government’s budget deficit was little changed from a previous forecast in the year through June, and the government remains committed to delivering a surplus this fiscal year. The shortfall was A$43.7 billion ($45.5 billion) in the 12 months to June 30, compared with the A$44.4 billion projected in the May budget, Swan said in a statement.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell three basis points to 2.70 percent.
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