Australia, N.Z. Dollars Fall Before Chinese Manufacturing Data

The Australian and New Zealand dollars weakened against their U.S. peer as risk appetite fell before a private report that’s forecast to show Chinese manufacturing is strengthening.

The Aussie dollar declined versus the majority of its most- traded counterparts as U.S. stocks dropped amid concern a budget standoff will push the world’s biggest economy into recession. The New Zealand dollar, nicknamed the kiwi, fell versus the greenback as commodities declined. A Bloomberg survey forecast a report will show China’s purchasing managers’ index rose to 50.8 in December from 50.5 the prior month. A reading above 50 indicates expansion. China is Australia’s biggest trading partner and New Zealand’s second-largest export market.

“A near-term agreement on the U.S. fiscal cliff is becoming increasingly unlikely, in our view, and continued political deadlock is likely to have a negative impact on financial-market confidence and risk-sensitive assets, including the Australian dollar,” Jose Wynne, head of North America foreign-exchange research for Barclays Plc’s investment banking unit in New York, wrote yesterday in a note to clients.

Australia’s currency depreciated 0.3 percent to $1.0528 yesterday in New York, after earlier falling 0.5 percent, its biggest intraday drop since Nov. 29. It rose 0.2 percent to 88.06 yen.

The kiwi declined 0.1 percent to 84.33 U.S. cents. It climbed 0.4 percent to 70.53 yen and touched 70.67 yen, its highest level since October 2008.

U.S. Showdown

The Standard & Poor’s 500 Index fell as much as 0.9 percent as U.S. lawmakers from both political parties expressed renewed pessimism about the prospects for resolving a budget showdown before more than $600 billion automatic in tax increases and spending cuts start taking effect in January. The Congressional Budget Office has said that if nothing changes, the stalemate probably would lead to a recession.

S&P’s GSCI Index of raw materials fell 0.9 percent.

New Zealand’s dollar has strengthened 6.4 percent this year, the biggest increase among the 10 developed-nation currencies monitored by the Bloomberg Correlation-Weighted Indexes. The Aussie has gained 0.6 percent, and the U.S. dollar has fallen 2.8 percent.

To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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