The Australian and New Zealand dollars fell for a second day against the yen and sovereign bonds rose as Italy’s inability to form a government and Cyprus’s bailout damped demand for riskier assets.
The so-called Aussie also weakened versus the dollar as Chinese stocks slid the most in three weeks. Both South Pacific nations count China as their biggest trading partner. Financial markets in countries including the U.S., U.K. and Australia will be shut tomorrow for Good Friday.
“The euro zone is like a factory of bad news and worry, so there’s always going to be a new product to buy,” said Sacha Tihanyi, a Hong Kong-based senior foreign-exchange strategist at Bank of Nova Scotia’s Scotiabank unit. “When equity markets soften as they did overnight, and in markets today we’ve got China taking a hit, we’re going to see Aussie and kiwi suffer a bit more.”
The Australian dollar dropped 0.5 percent to 98.15 yen as of 4:41 p.m. in Sydney and fell 0.2 percent to $1.0427. New Zealand’s currency slid 0.3 percent to 78.76 yen and was little changed at 83.67 U.S. cents.
Australia’s 10-year bond yield decreased 10 basis points, or 0.1 percentage point, to 3.42 percent. The rate on similar-maturity securities in New Zealand fell 10 basis points to 3.49 percent.
The Shanghai Composite Index of stocks sank 2.5 percent, the most since March 4, as the government signaled that it will take steps this year to loosen state control over interest rates and the yuan. The broader MSCI Asia Pacific Index lost 0.8 percent.
Investors favored the safest assets before Cyprus’s banks open their doors to customers today for the first time in almost two weeks, with new rules curbing access to cash. Lenders in Cyprus have been closed since March 16, when the European Union presented a plan to force losses on depositors in exchange for a bailout.
The leaders of Italy’s Five Star Movement said they will not form a coalition government with Pier Luigi Bersani, the head of the Democratic Party. Bersani won a majority in the lower house of Italy’s parliament last month. He needs additional support in the Senate to form a viable government.
“Cyprus and Italy are still in the background, so the topside is limited,” said Alex Sinton, director for institutional foreign exchange in Auckland at Australia & New Zealand Banking Group Ltd. “Aussie is probably not going to go through $1.0480.”
The currency will find buyers toward $1.0410 while the kiwi will be supported near 83.30 U.S. cents, he said.
The Aussie was little changed after Australia’s statistics bureau said private sector credit rose 0.2 percent in February from January, compared with the median forecast of a 0.3 percent gain in a Bloomberg News survey of economists. Total lending climbed 3.4 percent from a year ago.