The Australian and New Zealand dollars declined against their major peers as stocks tumbled for a second day in China, the biggest trading partner of both South Pacific nations.
The currencies declined toward six-year lows versus the dollar reached earlier this month as risks to Chinese growth raised concern the central banks of Australia and New Zealand could be forced to continue to reduce interest rates. Swaps traders see 20 basis points in rate cuts by the Reserve Bank of Australia over the next 12 months, compared with 38 basis points of reductions by its New Zealand counterpart, according to Credit Suisse Group AG indexes.
“The tumble in Chinese stocks is spurring risk aversion,” said Takuya Kanda, a senior researcher at Gaitame.com Research Institute Ltd. “In this environment, the odds are stacked against the currencies of emerging-market countries and commodity producers.”
The Aussie weakened 0.1 percent to 73.34 U.S. cents as of 6:32 a.m. in London from Tuesday, while the kiwi dropped 0.3 percent to 65.84 U.S. cents.
The Shanghai Composite Index of stocks dropped as much as 5.1 percent Wednesday after closing 6.2 percent lower the previous session.
“As long as China remains volatile and down, it keeps the more risk-averse currencies underperforming,” said Emma Lawson, senior currency strategist at National Australia Bank Ltd. in Sydney.