Aussie, N.Z. Dollars Fall Before Europe Confidence, Jobs Reply

The Australian and New Zealand dollars halted one-day gains from yesterday as concern that fiscal turmoil in Europe is hurting the region’s economic growth curbed demand for higher-yielding assets.

The so-called Aussie weakened versus most of its 16 major counterparts before reports this week that may show confidence remained weak and the jobless rate rose across the 17 nations that share the euro. New Zealand’s currency fell against all of its most-traded peers after after yield premiums on Spain’s debt over Germany’s rose to the most in 17 years, increasing speculation that the euro area’s debt crisis is worsening.

“The uncertainty in Europe and the unknown of how governments are going to fund the recapitalization of banks are impacting the Aussie again today,” said Greg Gibbs, a foreign- exchange strategist at Royal Bank of Scotland Group Plc in Sydney. “It’s pretty clear that several periphery countries are under a lot of stress already.”

Australia’s dollar lost 0.3 percent to 98.24 U.S. cents as of 9:43 a.m. in Sydney after rising 1 percent yesterday, its biggest one-day gain since April 12. It fell 0.2 percent to 78.17 yen. New Zealand’s currency, often called the kiwi, declined 0.3 percent to 75.94 cents after advancing 1.1 percent yesterday. It slid 0.2 percent to 60.43 yen.

Australia’s bonds rose, pushing the yield on the 10-year note down by six basis points, or 0.06 percentage point, to 3.12 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was unchanged at 2.48 percent.

Consumer confidence in the euro area was at minus 19.3 in May, from minus 19.9 in April, according to a Bloomberg News survey before the final reading is released tomorrow. Thejobless rate climbed to 11 percent in April, the highest in data compiled by Bloomberg going back to 1990, economist forecasts in a separate survey showed before the June 1 report.

The extra yield investors demand to hold Spain’s 10-year bonds instead of similar-maturity German notes soared to 5.12 percentage points yesterday, the most since 1995, according to data compiled by Bloomberg.

 

Source: Bloomberg

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