Australia’s dollar slid from the highest level in four months before reports that may show the euro area’s deepening debt crisis is curbing prospects for growth, sapping demand for higher-yielding assets.
The so-called Aussie weakened versus the yen, halting a three-day advance, before a euro-region consumer confidence report today and unemployment data tomorrow. European Central Bank President Mario Draghi and Bundesbank President Jens Weidmann will hold talks in the coming days, two central bank officials said. The Federal Reserve’s rate-setting committee begins a two-day meeting tomorrow, while ECB officials gather for a policy decision on Aug. 2.
“There is room for disappointment this week, and the real key is what’s happening in Europe,” said Greg Gibbs, a senior currency strategist at Royal Bank of Scotland Group Plc in Singapore. “It may see the Aussie come under a little bit of pressure.”
The Australian dollar fell 0.1 percent to $1.0469 as of 4:11 p.m. in Sydney, having earlier climbed as much as 0.1 percent to $1.0497, the strongest since March 27. The Aussie fell 0.3 percent to 82.06 yen after rising 2.9 percent in the past three days.
New Zealand’s currency bought 80.85 U.S. cents, 0.1 percent lower than last week’s close. It earlier rose to 81.13 cents, the highest since May 2. The so-called kiwi declined 0.3 percent to 63.36 yen.
Australia’s 10-year government bond yield climbed as much as 0.18 percentage point to 3.19 percent, the highest level since July 4. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, touched 2.82 percent, a level last surpassed on July 5.
A final reading for an index of household sentiment in the euro zone will probably show the gauge dropped to minus 21.6 this month from minus 19.8 in June, according to the median forecast in a Bloomberg News survey of economists before the European Commission releases its report today. That would be the lowest since August 2009 and would match the initial estimate on July 23. Figures tomorrow may show the euro-area jobless rate climbed to a record 11.2 percent last month, a separate poll indicated.
The ECB’s Draghi is trying to build consensus among governments and central bankers for a plan to ease borrowing costs in Spain and Italy before euro-region policy makers convene this week. He meets with U.S. Treasury Secretary Timothy Geithner in Frankfurt today, after pledging last week to do whatever it takes to preserve the euro.
While Fed officials refrained from introducing a third round of asset purchases at their session last month, central bank Chairman Ben S. Bernanke indicated this month that it’s an option.
“Expectations of policy easing are producing risk appetite for the kiwi and the Aussie,” said Mike Jones, a currency strategist at Bank of New Zealand in Wellington. “We’re back in a risk-on sort of environment.”
The MSCI Asia Pacific Index of shares climbed 1 percent.
The Aussie has advanced versus all of its major peers this month, rising 2.2 percent against the dollar and gaining 0.4 percent versus the yen. The kiwi has added 0.9 percent against its U.S. counterpart since June 30 and lost 0.9 percent versus Japan’s currency.
Sales of newly built homes in Australia rose for a third straight month in June, according to a report today by the Housing Industry Association, citing a survey of the nation’s largest builders. In New Zealand, building approvals rebounded in June after declining in the previous two months, according to data from the country’s statistics office.