Australian, N.Z. Dollars Fall as Asian Stocks Drop

The Australian and New Zealand dollars slid against most major peers as Asian stocks extended a global retreat, sapping demand for higher-yielding assets.

Both currencies are headed for their first monthly drop this year amid concern Chinese manufacturing will slow, curbing demand for resource exports. Australia’s dollar touched the weakest level in five months against New Zealand’s currency before a report forecast to show annual growth in bank lending in the larger nation was the slowest since August.

“A drop in Asian stocks is a negative catalyst for the South Pacific nations’ currencies,” said Takuya Kawabata, a researcher at Research Institute Ltd. in Tokyo, a unit of Japan’s largest currency-margin company. “We’d like to be cautious about a Chinese slowdown because it weighs on Australia’s dollar.”

The so-called Aussie declined 0.3 percent to $1.0426 as of 4 p.m. in Sydney from yesterday when it dropped 0.7 percent. It sank to as low as NZ$1.2732, a level unseen since Oct. 12. The New Zealand dollar lost 0.3 percent to 81.83 U.S. cents.

The Australian dollar has lost 2.8 percent against the U.S. currency this month, while the so-called kiwi has slid 1.9 percent.

The MSCI Asia Pacific Index of shares dropped 0.5 percent today after the Standard & Poor’s 500 Index fell 0.3 percent in New York yesterday.

HSBC Holdings Plc and Markit Economics said on March 22 that their flash reading for Chinese manufacturing this month was at 48.1, compared with a final 49.6 in February and below the 50 level that divides expansion from contraction. The China Federation of Logistics & Purchasing will issue its purchasing managers index on April 1, with economists predicting a 51 figure. The nation is Australia’s largest overseas market and New Zealand’s second-biggest export destination.

Credit Growth

Australian private credit probably rose 3.3 percent year-on-year in February, compared with a 3.5 percent gain the prior month, according to the median economist estimate. The Reserve Bank of Australia will release the figure on March 30.

“The slow credit growth environment could constrain the pace” of large banks’ future profit growth, the RBA said in its financial stability review released today. “The retail, manufacturing, construction and tourism sectors are facing headwinds from subdued retail spending and the high exchange rate.”

Yields on Australia’s two-year government notes slid seven basis points to 3.62 percent. The spread between the securities and similar-maturity Japanese debt narrowed to 3.5 percentage points from a four-month high of 3.69 on March 15.

Yield Spreads

Australia’s dollar lost 0.7 percent to 86.41 yen, trimming its gain this year to 10 percent. The kiwi slid 0.7 percent to 67.81 yen and has advanced 13 percent in 2012.

Two-year interest-rate swaps in New Zealand, which exchange a fixed rate for a floating one, fell to 3.065 percent from 3.075 percent.

The Aussie has added 2.1 percent this year against the greenback, while the kiwi has risen 5.3 percent. Both currencies are set for a second-straight quarter of gains. The Standard & Poor’s GSCI Total Return Index for commodities has climbed 7.9 percent this quarter, while the MSCI All-Country World Index of shares has jumped 12 percent.

The U.S. Commerce Department will probably say today that orders for durable goods rose 3 percent in February after dropping 3.7 percent the month before, according to economists.

“It tends to be the case if the U.S. is performing well in an economic sense, risk sentiment is generally well supported,” said Hamish Pepper, assistant vice president in Singapore at Barclays Capital. “In that environment the Australian dollar and the New Zealand dollar tend to perform well.”

Australia’s currency will climb to $1.07 in 12 months’ time, while the New Zealand dollar will reach 86 U.S. cents, said Pepper, who worked for the Reserve Bank of New Zealand for four years before joining the London-based Barclays.

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