The Australian dollar fell against the majority of its most-traded counterparts before the Reserve Bank of Australia releases minutes tomorrow of its December meeting when it cut interest rates for the second straight month.
The New Zealand dollar weakened amid concern euro-area policy makers won’t be able to contain the region’s sovereign-debt crisis as they discussed additional funding through the International Monetary Fund. Both South Pacific nations’ currencies extended losses after state television in North Korea announced the death of leader Kim Jong Il, sapping demand for riskier assets in Asian markets.
“We’re looking for markets to remain volatile, given the uncertainty about the euro-area outlook,” said Emma Lawson, a currency strategist at National Australia Bank Ltd. in Sydney. “The market will be expecting the RBA to have downgraded the economic outlook to some degree to warrant the interest-rate cut, so what we’ll be looking for is to what degree that was due to the European situation.”
The Australian dollar fell 0.7 percent to 99.14 U.S. cents at 11:16 a.m. New York time. It reached the weakest level since Nov. 29 last week, falling to 98.61 U.S. cents. The so-called Aussie declined 0.4 percent to 77.30 yen.
New Zealand’s currency weakened 0.2 percent to 75.86 U.S. cents. The kiwi dropped 0.2 percent to 59.14 yen.
The MSCI World Index of stocks fell 0.8 percent while South Korea’s Kospi index slumped as much as 4.9 percent after Kim’s death was reported.
The RBA is scheduled to release tomorrow the minutes of its most recent policy meeting on Dec. 6, when it cut the overnight cash rate target to 4.25 percent from 4.5 percent, its first back-to-back reduction since 2009.
“Financing conditions have become much more difficult, especially in Europe,” RBA Governor Glenn Stevens said in a statement accompanying that decision. “This, together with precautionary behavior by firms and households, means that the likelihood of a further material slowing in global growth has increased.”
A Credit Suisse Group AG index based on swaps shows traders are betting Australia’s central bank will cut rates by 134 basis points during the next 12 months. That compares with wagers for 112 basis points of easing indicated on Dec. 7.
Euro-area finance ministers held a conference call to discuss 200 billion euros ($260 billion) in additional funding through the International Monetary Fund and the mechanics of a so-called fiscal compact that was negotiated at a Dec. 9 European Union summit, according to two people familiar with the planning.
The Australian dollar has fallen 3.1 percent against its U.S. counterpart this year, while the kiwi has dropped 2.8 percent.