Aussie Dollar Trades Below One-Week High on U.S. Economic Growth Concern

[Muthukali]

The Australian dollar traded below a one-week high amid concern U.S. economic growth may be weaker than forecast, sapping demand for riskier assets.

The New Zealand dollar extended yesterday’s drop following a report that showed U.S. retail sales increased less than projected and before data that may indicate a wider trade deficit for the world’s largest economy. Declines in the so- called Aussie and kiwi were limited as Asian stocks rallied after European Central Bank President Mario Draghi said his strategy for tackling Europe’s crisis is beginning to work.

“The risks to the European economy and to the broader global economy are still to the downside,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia. “That suggests that there’s a cap on commodity prices and commodity currencies like the Aussie and kiwi.”

Australia’s dollar bought $1.0327 at 1:23 p.m. in Sydney from $1.0333 in New York yesterday, when it rose as high as $1.0378, the strongest level since Jan. 4. The Aussie was at 79.30 yen from 79.32 yesterday.

New Zealand’s currency slipped 0.2 percent to 79.22 U.S. cents from yesterday, when it fell 0.4 percent. It slid 0.2 percent to 60.83 yen.

The Thomson Reuters/Jefferies CRB Index (CRY) of raw materials fell 1.2 percent yesterday.

U.S. Economy
The U.S. trade deficit probably widened to $45 billion in November, according to the median forecast of economists surveyed by Bloomberg News before the Commerce Department publishes its figures today.

Data released yesterday indicated sales at U.S. retailers climbed 0.1 percent in December, less than the 0.3 percent gain predicted in a Bloomberg survey.

A separate report showed new applications for unemployment benefits climbed by 24,000 to 399,000 in the week ended Jan. 7. Four of the five previous weekly reports showed a decline in initial claims.

Investors were “getting too bullish about the fall in the jobless claims in December, same thing with the retail trade,” said Commonwealth Bank’s Capurso. He expects the Australian dollar to fall to 98 U.S. cents by the end of this quarter, and the kiwi to decline to 75 U.S. cents.

Losses in the South Pacific currencies were limited after the ECB president said yesterday in Frankfurt that while “substantial downside risks” remain, there are “tentative signs” that the euro-area economy is stabilizing. European policy makers left their benchmark rate unchanged at 1 percent yesterday.

The MSCI Asia Pacific Index (MXAP) of stocks jumped 0.6 percent, following a 0.3 percent gain in the MSCI World Index (CRY) yesterday.

Australia’s government bonds fell, with the yield on 10- year notes climbing six basis points, or 0.06 percentage point, to 3.81 percent.

 

[Muthukali]

Euro Set to End Five-Week Decline After ECB Says Credit Shortage Averted

The euro was set to halt a five-week drop against the dollar as Italy prepared to sell bonds and after European Central Bank President Mario Draghi said policy makers have averted a credit shortage.

The greenback slid against most of its major peers this week before a report that may show confidence among U.S. consumers gained, damping demand for the currency as a haven. The Australian and New Zealand dollars were set to strengthen for a fourth week against their U.S. counterpart as Asian stocks rose after shares in New York extended gains.

“The European liquidity operations are having a positive effect on risk appetite at the moment,” Chris Weston, an institutional trader at IG Markets Ltd. in Melbourne. “The bond auctions are becoming more positive and yields are declining and that’s having a positive impact on euro.”

The euro was unchanged from yesterday in New York at $1.2814 as of 10:13 a.m. in Tokyo, and poised to rise 0.8 percent this week. The 17-nation currency was little changed at 98.38 yen. The dollar fetched 76.79 yen from 76.76.

Australia’s dollar was at $1.0329 from $1.0333, set to gain 1.1 percent this week. New Zealand’s currency traded at 79.27 U.S. cents from 79.37, headed for a 1.6 percent weekly advance.

The MSCI Asia Pacific Index strengthened 0.7 percent. The Standard & Poor’s 500 Index rose 0.2 percent yesterday.

Italy will sell bonds due in 2014 and 2018 today. The nation’s Treasury raised 12 billion euros ($15.4 billion) from a bill auction yesterday. Italy’s 10-year yield fell 35 basis points, 0.35 percentage point, to 6.63 percent.

‘Tentative Signs’
The ECB’s Draghi said the bank’s massive injection of cash into the financial system last month is beginning to lubricate seized-up credit markets. “There are tentative signs of stabilization of economic activity at low levels,” he said in Frankfurt yesterday. Policy makers held the benchmark rate at a record low of 1 percent after two straight reductions.

“The corrective move is not unrealistic, given that we’re going into a long U.S. weekend, so some people will have wanted to take off some of the positions” betting on euro declines, said Alex Sinton, a senior dealer at ANZ National Bank Ltd. in Auckland. “It’s a minor corrective move of an overall trend that’s still in place while they take measures to correct the underlying issue, which is spending more than is being earned and budget deficits of extreme proportions.”

The U.S. is closed for a public holiday on Monday.

Greece’s private creditors said yesterday time for a debt- swap deal is running out after talks between financial and government representatives in Athens failed to yield an agreement to cut the country’s borrowing load.

Time Running Short
“A range of issues were discussed and some key areas remain unresolved,” the Institute of International Finance, which represents banks that hold Greek debt, said in an e-mailed statement yesterday. Discussions will continue in Athens today, “but time for reaching an agreement is running short,” it said.

A senior finance ministry official said yesterday a final outline on a deal could be reached by the end of next week with a formal public offer made at the beginning of February. He declined to be identified. The IIF has said its goal is for the swap to implemented by the end of January.

Lawmakers from German Chancellor Angela Merkel’s party are stepping up pressure on Greece, saying that a Greek exit from the euro region would be manageable. The comments by senior members of Merkel’s Christian Democratic Union were made before a meeting of the CDU leadership that begins today.

The euro will target a drop to about $1.20 and possibly lower toward $1.16 this year, ANZ’s Sinton said.

U.S. Confidence
Demand for the dollar was limited on prospects improving confidence in the world’s biggest economy will curb demand for safer assets.

The Thomson Reuters/University of Michigan preliminary consumer confidence index for January probably gained to 71.5, the highest level in seven months, from 69.9 at the end of December, according to the median forecast of economists surveyed by Bloomberg News before the data are released today.

The dollar has depreciated 0.6 percent in the past week, the second-worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes.