The Australian and New Zealand dollars fell for a second day versus the greenback after Standard & Poor’s cut the U.S. long-term credit outlook to negative, damping demand for higher-yielding assets.
Australia’s currency dropped for a fourth day against the yen as Asian equities extended a slump in shares around the world, discouraging investors from buying the South Pacific nation’s securities. The Australian and New Zealand currencies also weakened against most of their major counterparts on concern Europe’s debt crisis is worsening.
“Everywhere including the U.S. and Europe aren’t looking good fiscally,” said Osao Iizuka, head of foreign-exchange trading in Tokyo at Sumitomo Trust & Banking co., a unit of Japan’s third-largest banking group. “Risk aversion may cause selling of high-yielding currencies.”
Australia’s dollar declined to $1.0485 as of 11:35 a.m. in Sydney from $1.0509 in New York yesterday. The Aussie weakened 0.4 percent to 86.55 yen. New Zealand’s dollar fell 0.6 percent to 78.64 U.S. cents, and slipped 0.7 percent to 64.91 yen.
The MSCI Asia Pacific Index of shares slid 1.1 percent after the Standard & Poor’s 500 Index fell 1.1 percent yesterday.
S&P put the U.S. government on notice that it risks losing its AAA credit rating unless policy makers agree on a plan by 2013 to reduce budget deficits and the national debt.
‘Meaningfully Weaker’
“If an agreement is not reached and meaningful implementation does not begin by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer ‘AAA’ sovereigns,” New York-based S&P said yesterday in a report that maintained its top rating on U.S. long-term debt while lowering the outlook to “negative” for the first time.
The Australian and New Zealand dollars were among the worst performers versus the yen today of 16 major counterparts after Greece’s Eleftherotypia newspaper said yesterday the nation asked the International Monetary Fund and European Union to extend the maturities of all its debt.
Finance Minister George Papaconstantinou brought the request to EU finance ministers at their meeting in Hungary on April 8-9 and to representatives of the EU, European Central Bank and IMF who visited Greece in April, the Athens newspaper said, without saying where it got the information.
Australia’s currency was little changed after the Reserve Bank of Australia viewed its policy setting as “appropriate,” saying it will look through higher inflation and slower growth stemming from natural disasters,
“Headline inflation was likely to be quite high in the March quarter, while GDP would be held down, to a greater extent than earlier assumed,” the RBA said today in minutes of its April 5 meeting. In setting interest rates, “the board would look through these fluctuations,” it said.
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