Australian Dollar Drops as Stocks Fall; Kiwi Gains Versus Aussie

Australia’s dollar slid against most of its 16 major counterparts as Asian stocks declined, sapping demand for higher-yielding assets.

New Zealand’s dollar climbed toward a three-month high versus the so-called Aussie after the smaller nation’s central bank said it expects the economy to recover. Losses were limited in the New Zealand and Australian currencies ahead of a Chinese report tomorrow that economists predict will show manufacturing expanded this month in the world’s second-largest economy.

“Risk sentiment is deteriorating on the back of stock declines, weighing on the Australian and New Zealand dollars,” said Kengo Suzuki, a currency strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest bank by market value.

Australia’s dollar dropped 0.3 percent to $1.0390 as of 3:58 p.m. in Sydney and is little changed this month. New Zealand’s currency, known as the kiwi, fell 0.1 percent to 83.50 U.S. cents, paring a monthly gain to 0.8 percent.

The MSCI Asia Pacific Index (MXAP) of shares lost 0.3 percent, snapping a two-day gain.

The kiwi strengthened 0.1 percent to NZ$1.2442 per Australian dollar. It reached NZ$1.2429 on Jan. 25, the strongest since Oct. 9. Two-year interest-rate swaps in New Zealand fell one basis point to 2.89 percent.

RBNZ Decision

Reserve Bank of New Zealand Governor Graeme Wheeler said in a statement that global growth is set to recover in 2013, after leaving the benchmark interest rate unchanged at 2.5 percent. The central bank “does not want to see financial stability or inflation risks accentuated by housing demand getting too far ahead of supply,” he said.

“This is the clearest indicator that the next move is up for the cash rate as housing supply always responds with a lag,” Annette Beacher and Alvin Pontoh, analysts in Singapore at TD Securities Inc., wrote in a research note. “The not- dovish stance taken by Wheeler took the markets by surprise.”

A gauge of house prices in the country climbed to a record high in November and remained closer to that level last month, according to data from the Real Estate Institute of New Zealand.

The Purchasing Managers’ Index for China’s manufacturing will probably rise to 51 in January, the highest since April, from 50.6 last month, according to the median estimate of economists surveyed by Bloomberg News. The National Bureau of Statistics and China Federation of Logistics and Purchasing will release the data tomorrow.

Aussie-Euro

The yield on Australia’s benchmark three-year note dropped for the first time in five sessions, sliding four basis points to 2.83 percent. The rate touched 2.9 percent yesterday, the highest since Aug. 16.

The Australian dollar-U.S. currency pair “is now very much being driven by moves” in the Australian dollar-euro rate, Ray Attrill, global co-head of currency strategy at National Australia Bank Ltd. in Sydney, wrote in a report today. “Amid evidence from our own internal flow data that foreign asset managers continue to liquidate holding of Australian government bonds, this is exposing renewed downside vulnerability” to the Aussie against the greenback, he wrote.

Australia’s currency fell 0.3 percent to 76.58 euro cents after earlier touching 76.48, the lowest since Dec. 20, 2011.

To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net

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

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