RTTNews - During Asian deals on Wednesday, the Australian and New Zealand dollars plunged against their key counterparts as the global stock market weakness reduced demand for higher-yielding currencies.
Asian stocks fell for a sixth day, led by finance and mining companies, as an unexpected drop in Japanese machinery orders fanned concern a global economic recovery will falter. With economic reports from across the globe not turning out to be any encouraging and with earnings reports due soon, participants appear wary of picking up stocks today.
Tokyo stocks fell 2.2%, with the Hong Kong's Hang seng slid 1.7%, while South Korea's Kospi lost 0.9%. Australia's key stock measure fell 0.5 percent, while mainland China's Shanghai Composite index- the world's best-performing index this year, tumbled 2.2 percent. New Zealand stocks dropped 0.5%.
The Australian currency declined to a 15-day low against the US dollar, and the Japanese yen and a 2-week low against its European and Canadian counterparts.
In economic news from Australia, consumer confidence surged in July, hitting its highest level in about 18 months, as Australians stayed optimistic about the outlook for the domestic economy. The Westpac-Melbourne Institute index of consumer sentiment rose a seasonally adjusted 9.3% in the month to 109.4. The reading showed optimists out-numbered pessimists quite decisively, for the first time since December 2007. The index saw the second-largest monthly rise since 1974, when the survey began.
Another report showed that the number of finance commitments on owner-occupied houses in Australia rose 2.2% in May, seasonally adjusted, to 63,855. The data released by the Australian Bureau of Statistics said total housing finance by value rose by a seasonally adjusted 2.3% in May to A$22.678 billion.
Yesterday, the Reserve Bank of Australia retained its cash rate at 3% as expected for third straight month. The official cash rate now stands at its lowest level in 49 years.
Australian economic conditions have to date not been as weak as expected a few months ago. However, output was sluggish and capacity utilization fell back to near average levels and the Board sees further decline over the rest of the year. Again, weak demand for labor is lowering labor cost growth. These factors would abate inflation over the period ahead, the central bank assessed.
Against the US dollar, the Australian currency edged down to a 15-day low of 0.7855 during Asian deals on Wednesday. If the pair falls further, 0.775 is seen as the next target level. The aussie-dollar pair closed Tuesday's North American session at 0.7894.
The aussie-dollar pair that climbed to an 18-day high of 0.8158 on June 30 weakened thereafter and has lost around 4% thus far.
During Asian deals on Tuesday, the Australian dollar declined to 1.7714 against the European currency. This set a 2-week low for the aussie. The next downside target level for the Australian currency is seen around 1.801. The euro-aussie pair is now worth 1.7703, compared to 1.7649 hit late New York Tuesday.
The aussie has lost around 2% against the euro after hitting an 8-day high of 1.7322 on June 30.
Against the Japanese yen, the Australian currency plunged to a 15-day low of 74.06 during today's early Asian deals. The aussie-yen pair is now worth 74.19 with 73.5 seen as the next target level. The pair closed Tuesday's New York deals at 74.91.
The aussie-yen pair lost ground after hitting a 16-day high of 78.43 on July 1. Since then, the pair has depreciated around 5.4%.
The yen edged higher as Japan's machine orders unexpectedly fell for a third month and the current-account surplus narrowed because of plunging exports, stoking concern that the economy will struggle to emerge from its worst postwar recession.
Core machinery orders in Japan declined 3.0 percent on month in May compared to April, according to data published today by the Cabinet Office. It marked the third straight decline in machinery orders, signaling a continued slowdown in business activity as companies curtail capital spending. Machinery orders declined 5.4 percent in April and 1.3 percent in March.
Japan recorded an overall trade surplus in May of 1.302 trillion yen, according to data released today by the government. The nation's unadjusted current account reflected a decline in import values due to lower energy prices and the contraction of exports moderated. The current account was down 34.3 percent compared to one year earlier.
The Australian dollar touched a 2-week low of 0.9143 against its Canadian counterpart during Tuesday's early Asian trading. On the downside, 0.908 is seen as the next target level for the Australian currency. The aussie-loonie pair closed yesterday's deals at 0.9200.
The Australian dollar that rose to a new multi-month high of 0.9399 against the Canadian currency on June 30 has dropped around 3% since then.
The New Zealand dollar also showed weakness against its U.S. and Japanese counterparts during today's early Asian deals.
The NZ dollar edged down to a 2-day low of 0.6271 against the US dollar and traded near a 6-week low of 59.20 versus the Japanese yen. The next downside target level for the New Zealand currency is seen around 0.624 against the greenback and 57.9 against the yen. The New Zealand dollar closed Tuesday's trading at 0.6293 against the greenback and 59.73 versus the yen.
On the other hand, the kiwi showed strength against the European currency and the Australian dollar. The New Zealand dollar climbed to 2.2109 against the euro and a 1-week high of 1.2516 versus the aussie, compared to yesterday's closing values of 2.2150 and 1.2558, respectively. If the NZ dollar gains further, it may likely target 2.187 against the single currency and 1.239 versus the Australian currency.
Euro-zone final first quarter GDP report and the German industrial production for May are expected to influence trading in the European session today.
From the U.S., the Mortgage Bankers' Association's purchase applications index is due to be released at 7am ET. The Energy Information Administration is scheduled to release its weekly petroleum inventory report for the week ended May 1st at 10:30 am ET. At 3:00 pm ET, the U.S. Federal Reserve is expected to release its monthly consumer credit report.
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