The Australian and New Zealand dollars declined, snapping a two-day advance, amid concern the European Central Bank’s measures to boost liquidity will fail to stem the region’s debt crisis that’s weighing on global growth.
The so-called Aussie slid against most of its 16 major peers as Asian stocks declined, sapping demand for higher-yielding assets. Losses in the New Zealand dollar were limited after a report showed the economy expanded in the third quarter by more than economists had forecast.
“I think we’re still at the beginning of the crisis and nowhere near towards the end,” said Keagan York, the Sydney-based head of foreign-exchange strategy at Compass Global Markets. “The ECB loans operation was only a temporary measure to get some liquidity back into the markets. You’ll see the Aussie start to drift back off.”
The Australian dollar fell 0.3 percent to $1.0075 at 11:24 a.m. in Sydney. The currency slid 0.2 percent to 78.64 yen. New Zealand’s dollar lost 0.3 percent to 76.84 U.S. cents from yesterday, when it advanced 0.3 percent. The so-called kiwi fell 0.3 percent to 59.98 yen.
Australia’s government bonds advanced, pushing the yield on the 10-year security down four basis points, or 0.04 percentage point, to 3.76 percent. The MSCI Asia Pacific Index of stocks declined 0.4 percent.
Euro-area lenders took a record 489 billion euros ($638 billion) from the ECB in three-year loans yesterday, more than economists’ median estimate of 293 billion euros in a Bloomberg News survey. Policy makers are flooding the banking system with cheap money in an attempt to stave off a credit crunch by encouraging banks to maintain lending.
“Kicking the can down the road is more than likely going to continue into the new year,” said Compass’s York. “If the situation gets a bit more dire in Europe, we’re going to be seeing very low numbers for the Aussie and kiwi.”
The Australian dollar has fallen 1.6 percent against its U.S. counterpart this year, while the kiwi has declined 1.5 percent.
New Zealand’s gross domestic product expanded 0.8 percent in the third quarter from the previous three months, when it grew 0.1 percent, a government report showed today in Wellington. The median estimates in a Bloomberg News survey of 14 economists were for a 0.6 percent quarterly gain.
“New Zealand GDP growth rebounded strongly” in the third quarter, Barclays Plc’s currency strategists Hamish Pepper and Olivier Desbarres, wrote in a research note today. “Domestic activity will continue to increase. We remain constructive” on the kiwi dollar over the medium term.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates based on three-month bill rates, fell two basis points to 2.73 percent. The swaps are often used to speculate on changes in interest rates.
-- Editors: Rocky Swift, Garfield Reynolds