Aussie, N.Z. Dollars Weaken on U.S. Debt Ceiling Concern

The Australian dollar retreated from near a two-week high as concern U.S. lawmakers will struggle to agree on raising the nation’s debt ceiling overshadowed the bill they passed to avert the so-called fiscal cliff.

The Aussie slid versus most of its 16 major counterparts as officials in the world’s biggest economy turned their attention to a debate over raising the $16.4 trillion debt limit. An increase will be needed as early as mid-February, according to the U.S. Congressional Budget Office. The New Zealand dollar, also known as the kiwi, reversed a gain from yesterday as U.S. stock futures fell.

“All along, it’s been clear that the fiscal deal was not going to bring any real progress for long-term spending and tax reform,” said Todd Elmer, head of Group of 10 foreign-exchange strategy for Asia excluding Japan at Citigroup Inc. in Singapore. “There is some further upside for the Aussie and I doubt this temporary dip that we’re seeing is going to last.”

The Australian dollar lost 0.1 percent to $1.0491 as of 5:32 p.m. in Sydney from $1.0504 at the close yesterday, when the currency touched $1.0524, the strongest since Dec. 19.

The yield on 10-year Australian debt fell five basis points, or 0.05 percentage point, to 3.36 percent after earlier climbing to 3.44 percent, the highest since Aug. 21.

Futures for the Standard & Poor’s 500 Index (SPX) of U.S. shares fell 0.3 percent. The stocks gauge surged 2.5 percent yesterday, the biggest advance in a year.

The U.S. Treasury will probably exhaust what it called “extraordinary” measures by late February or early March to keep funding the government after the nation hit its debt limit on Dec. 31.

New Zealand’s currency was supported earlier after Fonterra Cooperative Group Ltd. (FCG) said whole-milk powder prices rose in the latest auction after declining in the four previous sales. The near-term contract for New Zealand product rose to $3,183 a metric ton, the highest price since Nov. 20, according to the Auckland-based company’s GlobalDairyTrade website.

New Zealand’s currency was at 83.34 U.S. cents, 0.1 percent lower than the 83.41 close yesterday, when it advanced as high as 83.97, the strongest since Dec. 19.

To contact the reporter on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net

To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net

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