The Australian dollar was set for its first five-day drop in three weeks as a global equity rout damped demand for higher-yielding assets.
The so-called Aussie weakened after Moody’s Investors Service lowered the ratings for 15 banks, including Credit Suisse Group AG and Morgan Stanley. Declines in the Australian andNew Zealand currencies were tempered on speculation their recent losses were too rapid.
“The environment is still quite risk averse,” said Janu Chan, an economist at St. George Bank Ltd. in Sydney. “There’s probably likelihood of more downward pressure on the Aussie.”
The Australian dollar was at $1.0051 as of 9:26 a.m. in Sydney after sliding 1.6 percent to $1.0034 yesterday. It was little changed at 80.60 yen. New Zealand’s currency traded at 78.76 U.S. cents, 0.2 percent higher than yesterday’s close. The so-called kiwi was at 63.17 yen from 63.14.
The Aussie headed for a 0.1 percent drop versus the U.S. dollar this week, halting a two-week advance. Its New Zealand counterpart was little changed from the period ended June 15.
Australian bonds rose, pushing the 10-year yield down by 7 1/2 basis points, or 0.075 percentage point, to 3.06 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was unchanged at 2.75 percent.
The Standard & Poor’s 500 Index (SPX) slumped 2.2 percent yesterday, the biggest one-day decline since June 1. The Stoxx Europe 600 Index fell 0.5 percent.
The banks that were downgraded have “significant exposure to the volatility and risk of outsized losses inherent to capital-markets activities,” Moody’s Global Banking Managing Director Greg Bauer said yesterday in a statement.
The Australian dollar has advanced 2.4 percent in the past month, the second best-performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. New Zealand’s currency was the biggest gainer, rising 4.5 percent in the same period.
“There may be just a little bit of profit-taking, following the sharp moves in through the London and New York sessions,” said Mike Jones, a Wellington-based currency strategist at Bank of New Zealand Ltd. “The risks to the kiwi and Aussie are still probably to the downside.”