Thursday, March 4, 2010

Australian, N.Z. Dollars Weaken on Concern Over Slower Growth

By Candice Zachariahs

March 4 (Bloomberg) -- The Australian and New Zealand dollars declined as concern over slowing growth in Europe damped demand for higher-yielding currencies.

New Zealand’s currency dropped toward a decade low against Australia’s dollar and slid against all 16 major counterparts on bets its central bank will keep the target rate at a record low when it meets March 11. The euro declined from a two-week high against the U.S. dollar on expectations the European Central Bank will maintain stimulus measures as Greece struggles to cut its budget deficit.

“The euphoria post the Greek austerity package last night is really fading,” said Sue Trinh, a senior currency strategist at RBC Capital Markets in Hong Kong. “The euro is struggling to sustain its gains, which is weighing on the Aussie generally.”

Australia’s dollar fell 0.5 percent to 90.17 U.S. cents as of 4:17 p.m. in Sydney from 90.59 cents yesterday, when it climbed to 90.86 cents, the strongest since Jan. 25. It traded at 79.77 yen from 80.14 yen.

New Zealand’s dollar fell 0.3 percent to NZ$1.3073 per Australian dollar and yesterday dropped to NZ$1.3102, the weakest level since November 2000. The kiwi dollar slid 0.7 percent to 68.97 U.S. cents, and declined 0.7 percent to 61.02 yen.

“The kiwi is being sold heavily on the cross against the Aussie,” said Tim Kelleher, vice-president of institutional banking and markets in Auckland at Commonwealth Bank of Australia, the nation’s biggest lender. The New Zealand dollar may slide toward NZ$1.35 and then NZ$1.38 per Aussie, he said.

Exports, Resistance

Australia’s economy grew at the fastest pace in almost two years, a government report showed yesterday, underscoring the central bank’s March 2 decision to increase the target interest rate for the fourth time since October to 4 percent. New Zealand’s benchmark is at 2.5 percent.

The Aussie snapped four days of gains against the greenback after reaching so-called resistance near 90.65 U.S. cents, its 100-day moving average, said Trinh.

“Certainly that’s the key level of resistance and Aussie has to close above there to get the short-term market bulled up,” she said.

Declines in the currency were limited as a government report showed the nation’s trade deficit narrowed more than economists forecast on rising exports of iron ore.

The nation’s trade shortfall shrank to A$1.18 billion ($1.07 billion) in January from a revised A$2.17 billion in December, the Bureau of Statistics said in Sydney. Economists forecast a A$1.6 billion gap, according to a Bloomberg News survey. Exports rose 1 percent to A$20.1 billion, the report showed.

Australian government bonds rose. The yield on 10-year notes fell two basis points, or 0.02 percentage point, to 5.47 percent, according to data compiled by Bloomberg. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 4.09 percent from 4.11 yesterday.

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