The Australia and New Zealand currencies dropped after European finance ministers failed to agree on a debt-reduction plan for Greece, damping demand for higher-yielding assets.
The so-called Aussie and kiwi dollars slid after a decline in Japanese imports dimmed the outlook for the South Pacific nations’ shipments. New Zealand’s currency dropped versus most major peers after Auckland-based Fonterra Cooperative Group Ltd. said whole-milk powder prices fell to a seven-week low.
“Greece is still a part of the equation, so if anything happens to Greece, it will still have a ripple effect on other euro-zone members,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “There is a possibility that the Aussie may actually go back down again toward parity” by the end of January, he said.
Australia’s currency dropped 0.4 percent to $1.0351 at 4:44 p.m. in Sydney from yesterday, and slid 0.2 percent to 84.71 yen. The New Zealand dollar fell 0.4 percent to 81.37 U.S. cents. It weakened 0.2 percent to 66.60 yen.
Euro-area finance chiefs will meet again on Nov. 26, Luxembourg Prime Minister Jean-Claude Juncker said in a statement after chairing a meeting of the ministers. They are battling among themselves and with the International Monetary Fund to find 15 billion euros ($19 billion) through 2014 for Greece and provide the nation with a sustainable plan to cope with its debt.
Japan’s imports slid 1.6 percent in October from a year earlier, the nation’s Ministry of Finance said in Tokyo today. Shipments from Australia fell 0.9 percent, while those from New Zealand declined 5 percent. Japan is the second-biggest overseas market for Australia and fourth-biggest destination for New Zealand’s exports.
“The slowdown in Japan’s economy is a negative for the Australian and New Zealand dollars,” said Kengo Suzuki, a currency strategist in Tokyo at Mizuho Securities Co., a unit of Japan’s third-largest bank by market value. “A drop in dairy prices is a selling catalyst for the New Zealand dollar.”
Milk powder for January delivery fell 2.5 percent, according to a trade-weighted index posted on the website of Fonterra, the world’s biggest dairy exporter. The near-term contract for New Zealand product dropped to $3,255 a metric ton, the lowest since Oct. 2.
The New Zealand dollar strengthened 9.5 percent in the past year, the biggest gainer among the 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The Aussie followed with a 5.3 percent jump.
Reserve Bank of Australia Governor Glenn Stevens yesterday reiterated his surprise that the nation’s currency hasn’t weakened much.
“While it’s not surprising that the Australian dollar has been very strong given the terms of trade event we have had, it is surprising that it has not declined much, at least so far, given that the terms of trade peaked more than a year ago,” Stevens said.
The nation’s terms of trade index, which measures the price of exports relative to imports, climbed to a record 130.2 in September last year and has fallen 9.2 percent since then, according to the Bureau of Statistics.
Australia’s bonds fell, with the benchmark 10-year yield adding four basis points to 3.19 percent.