Australia’s dollar declined against most of its major peers after the nation’s Reserve Bank said it increased sales of the currency last month to a category of buyers that includes foreign central banks.
Demand for the so-called Aussie was limited after an Israeli air strike on the Gaza strip and signs of a global slowdown reduced demand for riskier assets. Australian bonds rose, sending the benchmark 10-year yield to the lowest level in almost one month. The Australian and New Zealand dollars rallied versus the yen after Japan’s opposition leader Shinzo Abe called for unlimited central bank easing until deflation is defeated in the world’s third-largest economy.
“There will likely be more chatter that the RBA is perhaps conducting off-market, central bank-to-central bank transactions,” said Emma Lawson, a Sydney-based foreign-exchange strategist at National Australia Bank Ltd. “The Aussie is considered to have been strong due to these market transactions for investors buying our government debt. If it’s being conducted off-market, then perhaps that takes some pressure off the upside for the currency.”
Australia’s dollar slid 0.1 percent to $1.0361 as of 6:03 p.m. in Sydney from yesterday, when it dropped 0.6 percent. The Aussie gained 0.5 percent to 83.65 yen. New Zealand’s currency added 0.2 percent to 81.20 U.S. cents from yesterday. The so-called kiwi jumped 0.9 percent to 65.58 yen after earlier falling as much as 0.2 percent.
The RBA sold A$483 million ($500 million) more in local currency than it bought in October through the so-called other outright transactions category, the most since June 2009, according to data released today. It sold a net A$275 million in the spot foreign exchange market.
Demand for higher-yielding assets waned on increasing geopolitical risk and signs of a global economic slowdown. Israeli jets struck Gaza yesterday, killing the leader of Hamas’s military wing.
Gross domestic product in the 17-member euro area probably fell for a second-straight quarter in the three months ended in September, according to the median economist estimate compiled by Bloomberg News before the data today. Obama meets with congressional leaders including House Speaker John Boehner tomorrow to discuss the U.S. budget.
“The list of potential negatives out there is growing,” said Robert Rennie currency strategist at Westpac Banking Corp. in Sydney. “The difference between Obama and Boehner is still very large on the fiscal cliff, we have increasing tensions now in Gaza and disappointing data out of Europe. It argues for lower levels for the Aussie and kiwi.”
The MSCI Asia Pacific Index of shares slid 0.2 percent today, poised for a sixth-straight drop. MSCI’s World Index sank 1.2 percent yesterday.
Australian government bonds rose, with the 10-year yield declining four basis points, 0.04 percentage point, to 3.02 percent, the lowest since Oct. 16.
Abe, leader of Japan’s Liberal Democratic Party, reiterated his call for the Bank of Japan’s inflation target to be raised from the current 1 percent to 3 percent and said the central bank’s key rate should be lowered to zero or below.
The Australian dollar strengthened 2.5 percent in the past month, the best performer tracked by Bloomberg Correlation-Weighted Currency indexes. New Zealand’s dollar gained 0.4 percent in the same period.