Aussie Trades Near Eight-Week Low on Europe's Debt Concerns, Stock Losses
Australia’s dollar traded near an eight-week low versus the U.S. currency as concern that Europe’s debt crisis will spread curbed demand for higher-yielding assets.
The Aussie had its biggest monthly slump since May before a report forecast to show the nation’s economic growth slowed last quarter. The New Zealand dollar was close to a two-month low against the U.S. currency after data showed home-building approvals unexpectedly dropped in October. Both currencies fell as a slump in Chinese shares dragged down a regional benchmark index for equities.
“There is a little bit of investor concern about what the sovereign debt issues may mean for the growth outlook. You are seeing some investors reduce risk, reduce equity exposure and consequently move out of euros into U.S. dollars,” said Richard Grace, chief currency strategist at Commonwealth Bank of Australia in Sydney. “As a result of these, this is putting a bit of downward pressure on Aussie and kiwi.”
The Aussie fell 0.3 percent to 96.03 U.S. cents as of 11:40 a.m. in New York after earlier touching 95.44 cents, the weakest since Oct. 5. New Zealand’s dollar slid 0.2 percent to 74.45 U.S. cents after reaching 73.98 cents, the lowest level since Oct. 5.
The Aussie declined 2.3 percent against the dollar this month, while the kiwi has lost 2.8 percent.
Spain is the “big elephant” in the European debt crisis because there may not be enough money to bail out the Iberian nation, said Nouriel Roubini, the New York University professor who predicted the global financial crisis. His comment came as European governments agreed this week to an 85 billion- euro ($111 billion) aid package for Ireland.
The Shanghai Composite Index slid 3.4 percent, dragging the benchmark MSCI Asia Pacific Index 0.7 percent lower. China needs to raise interest rates by another 200 basis points to curb inflation, Zhong Jiyin, an economist with the Chinese Academy of Social Sciences, wrote in a commentary in the China Daily today. China is Australia’s biggest trading partner.
The report “certainly wouldn’t be a reason to buy Australian dollars,” Commonwealth Bank’s Grace said.
Australia’s gross domestic product advanced 0.4 percent last quarter from the previous three months, when it grew 1.2 percent, according to economist estimates before the report tomorrow.
To contact the editor responsible for this story: Rocky Swift at firstname.lastname@example.org