Aussie Holds Near Four-Month Low on Italian Stalemate

Australia’s dollar held a two-day drop to a more than four-month low as concern that Italy’s election stalemate will deepen Europe’s debt crisis curbed investor appetite for riskier assets.

Demand for New Zealand’s dollar was limited after the nation’s annual trade deficit unexpectedly widened. The so- called Aussie and kiwi headed for their biggest monthly drops against the U.S. dollar since May as global equities retreated. Election results in Italy showed Pier Luigi Bersani won the lower house by less than half a percentage point, while Silvio Berlusconi, the former premier fighting a tax-fraud conviction, gained a blocking minority in the Senate.

“Italy’s government will be uncertain and fragile over the next few weeks and commitments to reform will be also fragile,” said Imre Speizer, a strategist at Westpac Banking Corp. (WBC) in Auckland. Developments in Italy were “the catalyst to clean out extreme long positioning in the New Zealand and Australian dollars. You may well see further fallout.”

The Australian dollar slid 0.1 percent to $1.0216 at 4:15 p.m. in Sydney from yesterday, when it touched $1.0201, the lowest since Oct. 10. The Aussie lost 0.4 percent to 93.71 yen. New Zealand’s dollar fell 0.1 percent to 82.41 U.S. cents from yesterday, when it reached 82.24, the weakest since Jan. 4. The so-called kiwi weakened 0.3 percent to 75.64 yen.

On the month, Australia’s currency was set for a 2 percent drop versus the U.S. dollar, the biggest since May. New Zealand’s dollar was poised for a 1.8 percent decline, also the biggest in nine months.

Australian Yield

The yield on Australia’s 10-year bonds fell as much as five basis points, or 0.05 percentage point, to 3.327 percent, the lowest since Jan. 25.

The MSCI Asia Pacific Index was little changed, following a 0.6 percent drop yesterday. The Stoxx Europe 600 Index dropped 1.3 percent yesterday.

In New Zealand, imports exceeded exports by NZ$1.3 billion ($1.1 billion) in the 12 months ended January, compared with a revised NZ$1.16 billion shortfall in the year through December, the statistics office said today in Wellington. Economists expected an NZ$897 million gap, according to the median of nine estimates in a Bloomberg News survey.

“The trade figures weighed on the currency for only few minutes, and rightly so,” said Westpac’s Speizer. “We expect to see a bounce back in February, so there’s nothing sinister going on in terms of trade balance deteriorating.”

In Australia, the value of total construction fell 0.1 percent in the three months through Dec. 31 to A$51.9 billion ($53 billion) after a revised 1.9 percent rise in the previous three-months, the statistics bureau said today in Sydney. Economists had predicted a 1.5 percent advance.

Government figures tomorrow are expected to show growth in corporate expenditure moderated. Capital spending probably gained 1 percent from the third quarter, when it rose 2.8 percent, according to the median estimate of economists.

Interest-rate swaps data compiled by Bloomberg show traders see a 39 percent chance the central bank will lower its benchmark to 2.75 percent at the next meeting on March 5.

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

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

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