AUD: Australia, N.Z. Dollars Fall on China Outlook, Price Report
By Candice Zachariahs
Jan. 20 (Bloomberg) -- The Australian and New Zealand dollars fell a second day on concern China will continue efforts to curb loan growth and after a report from Wellington showed consumer prices unexpectedly declined.
Both currencies weakened as Chinese regulators asked some of the nation’s banks to limit lending after they failed to meet certain requirements that include those for capital, said Liu Mingkang, chairman of the China Banking Regulatory Commission. Australia’s dollar still traded near its strongest in a decade against the euro as investors sold Europe’s single currency on concern over fiscal problems in Greece.
“In the near term for risk and carry trades globally, further removal of policy stimulus by the Chinese authorities will be read as a negative,” said Khoon Goh, a senior markets economist at ANZ National Bank Ltd. in Wellington. New Zealand’s price report “suggests that the reserve bank has time up its sleeve to continue to monitor how the economy develops and they won’t be in any rush to bring forward the timing of the hiking cycle.”
Australia’s currency dropped 0.7 percent to 91.72 U.S. cents as of 1:48 p.m. in Sydney from 92.32 cents in New York yesterday. The currency fell 0.7 percent to 83.63 yen. It traded at 64.53 eurocents after yesterday touching 64.80, the most since September 2000.
New Zealand’s dollar slid 0.8 percent to 72.95 U.S. cents from 73.93 cents before the inflation report and 73.54 yesterday in New York. It declined 0.9 percent to 66.49 yen from yesterday.
China’s central bank yesterday guided its benchmark one- year bill yield higher for the second time this year in an effort to prevent bubbles emerging in the nation’s property and stock markets. China, Australia’s largest trading partner, last week said it was increasing the amount of funds that banks must set aside as reserves.
N.Z. Inflation
New Zealand’s consumer prices slipped 0.2 percent in the fourth quarter, Statistics New Zealand said today, compared with the median estimate from economists for prices to remain unchanged. Annual inflation was 2 percent.
Reserve Bank of New Zealand Governor Alan Bollard said last month he expected to keep the benchmark interest rate at a record low until the middle of this year to stimulate the economy. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates which is sensitive to interest-rate expectations, fell to 4.47 percent, near the lowest since Dec. 9, from 4.57 on Jan. 15.
Benchmark interest rates are 2.5 percent in New Zealand and 3.75 percent in Australia, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets.
Consumer Confidence
Australia’s dollar traded near its strongest in a decade versus the euro as European finance chiefs yesterday said Greece’s fiscal crisis is affecting other nations and called on the government to step up its budget-cutting efforts.
In Australia, consumer confidence rose in January by the most in six months, adding to signs the nation’s economy is robust enough for its central bank to resume a record run of interest-rate increases. Governor Glenn Stevens has raised rates three times since October amid the biggest jobs boom in more than three years.
“The euro is looking very heavy technically and people are getting a lot more concerned over the situation in Greece and other periphery countries,” said Greg Gibbs, a strategist at Royal Bank of Scotland Group Plc in Sydney. “There’s little evidence that the rates hikes are damping the economy,” in Australia. The Aussie may rise to 66.65 eurocents, the high it achieved in 2000, he said.
Australian government bonds fell. The yield on 10-year notes added seven basis points, or 0.07 percentage point, to 5.56 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 slipped 0.31 cents to 97.83 cents on the dollar to yield 5.55 percent, according to Australia & New Zealand Banking Group prices on Bloomberg at 2:05 p.m. in Sydney.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
Last Updated: January 19, 2010 22:16 EST
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