Monday, the Australian and New Zealand dollars showed weakness against their major counterparts as regional stocks and commodities tumbled on concerns about the intensity of the global recession.
The stock markets in Australia and New Zealand declined today, led by resource and financial stocks tracking the move on Wall Street, which declined on Friday on profit taking by investors after recent rally. Resource stocks declined after commodity prices fell in the international markets.
Financial stocks also slipped after U.S. Treasury Secretary stated that big banks might need much more assistance than anticipated. The already weaker economic fundamentals and anticipation of further strain on the global economy are dampening the glimmer of hope generated by the U.S. initiatives for reviving the economy.
On Friday, the Dow closed down 148.38 points or 1.9% at 7,776, the Nasdaq closed down 41.80 points or 2.6% percent at 1,545 and the S&P 500 closed down 16.92 points or 2% at 816.
In Asian trading, crude oil declined 2.31% or $1.17 a barrel to $51.21 a barrel. Light sweet crude for May delivery closed at $52.34 per barrel on the New York Mercantile Exchange on Friday, down $1.96 a barrel.
Market participants keenly await the outcome of the G-20 meeting where the recent initiatives proposed by the US administration to unclog the credit markets by helping banks sell toxic assets, and the reactions to the same from the European counterparts will decide the future course of action for the global economy. Fundamentally, the economic indicators are still very weak and the signs of recovery are not encouraging.
Australian Prime Minister Kevin Rudd said on Sunday that the world needed to see how already announced tax cuts and spending increases were working before discussing further fiscal stimulus.
Rudd, visiting London for the April 2 summit of the Group of 20 leading economies, said it was never the intention that the meeting would lead to an announcement of coordinated tax-and-spend moves.
In economic news from Australia, new home sales rose for a second consecutive month in February, the Housing Industry Association (HIA) said today, climbing 3.9 percent following an 8.3 percent monthly jump in January.
The Australian dollar declined to an 11-day low against the US currency, 10-day low against the Japanese yen and a 5-day low versus the Canadian dollar. Meanwhile, the New Zealand dollar slipped to a 1-week low against its Japanese counterparts, a 5-day low versus the greenback and declined from a 2 1/2-month high against the European currency.
The Australian dollar, which closed last week's trading at 0.6939 against the US currency, fell to an 11-day low of 0.6809 during early deals on Monday. On the downside, 0.664 is seen as the next target level for the Aussie.
The aussie that climbed to a new multi-month high of 0.7096 last week has lost around 3.8% since then.
In Asian trading on Monday, the Aussie slipped to a 5-day low of 0.8509 against the Canadian dollar. The next downside target level for the aussie is seen at 0.835. At Friday's close, the aussie-loonie pair was quoted at 0.8592.
The aussie that plunged to a 3 1/2-month low of 0.7731 against the loonie on February 02 strengthened 11% thereafter and reached a 2 1/2 -month high of 0.8664 on March 26. Since then, the aussie-loonie pair has depreciated 2%.
The Australian currency declined to a 10-day low of 65.58 against the Japanese yen on Monday's early deals. This may be compared to last week's closing value of 67.92. If the aussie-yen pair weakens further, it may likely target the 65.6 level.
The yen gained despite a disappointing economic report from Japan. Industrial output in Japan plummeted by 9.4% in February compared to the previous month, the Ministry of Economy, Trade and Industry said. That was slightly worse than forecasts that called for a decline of 9.0% following the 10.2% decline in January. On an annual basis, industrial output dropped 38.4% compared to forecasts of a 38.1% decline after the 31.0% retreat in the previous month.
The aussie-yen pair that traded near a 5-month high of 69.65 on March 24 has dropped around 5% since then.
During early deals on Monday, the Aussie dropped against the European currency. The euro-aussie pair that closed Friday's trading at 1.9169 is now worth 1.9399 with 1.945 seen as the next target level.
The ECB holds a rate review on Thursday. The European Central Bank will cut interest rates to the least since the European currency was introduced in 1999. Commerzbank analyst Christoph Weil said last week that the European Central Bank is set to cut the key interest rate in April by a further 50 basis points to 1% given the continued contraction of the Eurozone economy.
Commerzbank expects second quarter real GDP to fall 1%. On average for 2009, the Eurozone economy will probably contract by 4.5%, Weil said.
The New Zealand dollar also showed weakness against its major counterparts during early deals on Monday despite stronger building consent data.
The number of building permits issued in New Zealand was up 11.6 percent in February compared to the previous month, Statistics New Zealand said today. That follows a revised 13.0 percent monthly decline in January - which was originally reported as -13.1 percent on month.
In addition, New Zealand's M3 money supply grew 8.7% year-on-year in February, at a faster pace compared to a 6.9% rise in January, a report by the Reserve Bank said. A year earlier, in February, the money supply was up 6%.
The New Zealand dollar slipped to a 1-week low of 54.08 against the Japanese yen and a 5-day low of 0.5606 against the greenback during Monday's early trading. This may be compared to Friday's closing values of 55.75 and 0.5695, respectively. On the downside, the NZ dollar may likely find resistance near the 52.6 level against the Japanese unit and 0.553 level against the greenback.
The New Zealand dollar lost ground after hitting a 2 1/2-month high of 2.3225 against the euro during Monday's early Asian deals. The kiwi is currently trading at 2.3578 against the euro, with 2.436 seen as the next target level. The euro-kiwi pair closed Friday's New York deals at 2.3369.
The New Zealand dollar edged higher versus the Australian currency during Monday's early deals. The aussie-kiwi pair is currently trading at 1.2137, compared to last week's closing value of 1.2198.
In the European session, the Euro-zone business, consumer and economic confidence reports-all for the month of March have been slated for release.
Across the Atlantic, there are no significant economic reports due to be released.
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