Aussie Falls Against Major Peers Before U.S. Cliff Talks Resume

Australia’s dollar fell against all of its 16 major counterparts as U.S. lawmakers prepared to resume talks on how to avoid spending cuts and tax increases that could send the world’s biggest economy into recession.

The so-called Aussie headed for the biggest monthly drop since August versus the greenback and New Zealand’s dollar held an eight-day retreat after Treasury Secretary Timothy F. Geithner said he will take “extraordinary measures” to postpone a U.S. default into early 2013 while President Barack Obama and Congress work out a deficit-reduction deal. Declines in the South Pacific nations’ currencies were limited before data that may signal a pickup in China’s economy.

“Uncertainty and concerns about the fiscal cliff are starting to weigh on risk markets,” said Peter Dragicevich, a currency economist in Sydney at Commonwealth Bank of Australia. (CBA) “The Aussie and the kiwi are naturally susceptible to declines in global equity markets, particularly the U.S. markets.”

The Australian dollar slid 0.3 percent to $1.0349 as of 4:07 p.m. in Sydney, headed for a 0.8 percent decline this month. The Aussie bought 88.81 yen from 88.87 yesterday.

New Zealand’s dollar was unchanged at 81.98 U.S. cents from yesterday, when it touched 81.56, the lowest since Nov. 23. The currency fell 3.1 percent in the eight sessions through yesterday. It rose 0.3 percent to 70.35 yen.

Yields on 10-year Australian government bonds advanced one basis point to 3.35 percent.

China PMI

The purchasing manager’s index of Chinese manufacturing by HSBC Holdings Plc and Markit Economics will probably rise to 50.9 in December from 50.5 the previous month, according to the median estimate of economists surveyed by Bloomberg News before the data due on Dec. 31. A separate, government-backed index of manufacturing due on Jan. 1 will show an increase to 51 this month from 50.6 in November, economists estimate.

China is Australia’s biggest trading partner and New Zealand’s second-largest export market.

“The Chinese data have bottomed and started to show improvement,” said Commonwealth Bank’s Dragicevich. “That should provide some support for the Aussie and kiwi currencies, but a lot will depend on what the U.S. politicians do.”

Australia’s dollar has lost 1.3 percent this year, according to Bloomberg Correlation-Weighted Indexes which track 10 developed-nation currencies. The New Zealand dollar gained 3.1 percent over the same period.

To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net; Amina Mobley in Tokyo at amobley1@bloomberg.net

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

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