Dec. 21 (Bloomberg) -- Australia’s dollar touched the lowest level in more than two weeks after U.S. lawmakers scrapped a budget vote, rekindling concern the so-called fiscal cliff will drag down the world’s biggest economy.
Australia’s currency headed for weekly declines as House Republican leaders canceled a planned vote yesterday on a measure that would allow higher tax rates on annual income above $1 million, saying it didn’t have enough support to pass. The Australian and New Zealand dollars dropped against the yen as Asian stocks retreated.
“The fiscal-cliff negotiations are clearly a key focus for markets,” said Kymberly Martin, a markets strategist at Bank of New Zealand Ltd. in Wellington. As the uncertainty drags on “it has the potential to impact on risk appetite, and generally the Aussie and the kiwi perform worse in a more risk-averse environment.”
The Australian dollar fell 0.3 percent to $1.0453 as of 4:57 p.m. in Sydney from yesterday, after earlier touching $1.0438, the lowest since Dec. 4. The currency is headed for a 1.1 percent weekly loss, the biggest since the five days ended Oct. 5. The so-called Aussie dropped 0.7 percent to 87.82 yen. It touched 89.13 yen on Dec. 17, the highest level since May 2011.
The New Zealand dollar reached 83 U.S. cents, the weakest since Dec. 10, before trading at 83.04, 0.4 percent below yesterday’s close. It’s set for a 1.9 percent drop this week. The so-called kiwi lost 0.9 percent to 69.78 yen, poised for a 1.3 percent five-day decline. The currency reached 71.51 on Dec. 17, the highest since Oct. 2008.
Australian government bonds rose, with the yield on 10-year debt dropping three basis points, or 0.03 percentage point, to 3.33 percent. The MSCI Asia Pacific Index of stocks slipped 0.6 percent, after earlier rising as much as 0.6 percent.
The stalled U.S. budget talks won’t be resolved until the last week of 2012 or early in 2013. A House leadership announcement said the chamber will hold no more votes until after the Christmas holiday and will return “when needed.” More than $600 billion in automatic spending cuts and tax increases are set to go into effect next month if an agreement isn’t reached.
Australia’s dollar has lost 0.7 percent this year, according to Bloomberg Correlation-Weighted Indexes which track 10 developed-nation currencies. The New Zealand dollar gained 4.2 percent over the same period, the second-biggest gainer after the Norwegian krone.
-- Editors: Garfield Reynolds, Jonathan Annells
To contact the editor responsible for this story: Rocky Swift at email@example.com