Australian And New Zealand Dollars Plunge On Weak Equities

By @ibtimes on

RTTNews - During Asian deals on Wednesday, the Australian and New Zealand dollars plunged against their key counterparts as the weakness in most Asian stock markets reduced demand for higher-yielding currencies.

Asian markets are trading mostly weak today with the overnight negative close on Wall Street weighing on the markets. Investors are apparently locking in profits as they wait to hear what the U.S. Federal Reserve would say about the prospects for recovery in the world's largest economy.

Signs are growing that an economic recovery may finally be taking shape, but with dangers still lurking about, Federal Reserve policymakers are all but certain to leave a key interest rate near zero and let a $300 billion program to buy Treasury securities expire on schedule in September as economic gloom lifts.

Fed Chairman Ben Bernanke and his colleagues are slated to wrap up a two-day meeting on Wednesday afternoon, where they will take fresh stock of the nation's economic and financial conditions. So far, barometers suggest the worst recession since World War II is ending, and that the economy has started to grow again -- or will soon.

The Bank of England surprised traders on August. 6 by raising the size of quantitative easing measures by GBP 50 billion to GBP 175 billion.

In June, the FOMC decided along the expected lines, opting to hold interest rates unchanged at 0%-0.25%. The central bank did not make any changes to its qualitative easing measures, instead suggesting that as previously announced, it will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. The Fed also decided at that time to buy up to $300 billion of Treasury securities by autumn.

The Australian currency declined to a 12-day low against the US dollar and the Japanese yen, a 5-day low against its European counterpart and a 2-day low versus the Canadian dollar.

In economic news from Australia, consumer confidence rose to a near two-year high in August, as reported today by Westpac Bank and the Melbourne Institute.

The group said its index of consumer sentiment was up 2.7 percent compared to July, reaching its highest level since October 2007.

The index has increased 27.8 percent since May, making it the sharpest three-month gain since the survey's inception in 1975.

Against the US dollar, the Australian currency edged down to a 12-day low of 0.8214 during Asian deals on Wednesday. If the aussie falls further, 0.812 is seen as the next target level. The aussie-dollar pair closed Tuesday's North American session at 0.8293.

The aussie-dollar pair that climbed to a new multi-month high of 0.8473 on August 4 weakened thereafter and has lost around 3% thus far.

During Asian deals on Wednesday, the Australian dollar declined to 1.7216 against the European currency. This set a 5-day low for the aussie. The next downside target level for the Australian currency is seen around 1.722. The euro-aussie pair is now worth 1.7148, compared to 1.7071 hit late New York Tuesday.

The aussie has lost around 2% against the euro after trading near a 1-year high of 1.6856 on August 10.

Against the Japanese yen, the Australian currency plunged to a 12-day low of 78.45 during today's Asian deals. The aussie-yen pair is presently trading at 78.88, with 78.30 seen as the next target level. The pair closed Tuesday's New York deals at 79.62.

The aussie-yen pair lost ground after hitting a 10-month high of 82.04 on August 10. Since then, the pair has depreciated around 4%.

A final report from the Ministry of Economy, Trade and Industry showed today that Japan's industrial production growth in June came in at 2.3% on a monthly basis, revised down from 2.4% estimated initially. From the previous year, production plunged 23.5%.

Japan's corporate goods price index or the prices paid by producers dropped at a record pace in July, the Bank of Japan said today. The corporate goods prices slipped 8.5% year-on-year in July, quicker than the 6.7% fall in the preceding month. Moreover, this was the seventh consecutive month of decline.

Month-on-month, the producer prices climbed 0.4% in July, reversing ten consecutive months of falls. In June, prices slipped 0.4%. Economists expected the index to have remained unchanged from the previous month.

The Australian dollar touched a 2-day low of 0.9067 against its Canadian counterpart during early Asian trading on Wednesday. On the downside, 0.894 is seen as the next target level for the Australian currency. The aussie-loonie pair closed Tuesday's deals at 0.9139.

The Australian dollar that rose to a 5-week high of 0.9173 against the Canadian currency yesterday, has dropped around 1% since then.

The New Zealand dollar also declined to new multi-day lows against its U.S., European and Japanese counterparts during today's early deals.

Against the US dollar, the New Zealand currency edged down to a 9-day low of 0.6630 during Asian deals on Wednesday. On the downside, 0.657 is seen as the next target level for the kiwi. The kiwi-dollar pair closed Tuesday's North American session at 0.6676.

The kiwi-dollar pair that advanced to a new multi-month high of 0.6824 on August 7 has lost around 3% since then.

The New Zealand dollar that closed Tuesday's New York deals at 2.1216 against the European currency slipped to a 5-day low of 2.1341 during Wednesday's early trading. If the New Zealand currency falls further, 2.160 is seen as the next target level.

The kiwi that traded near a 10-month high of 2.0893 against the European currency on August 10, weakened thereafter and has depreciated around 2% thus far.

During Wednesday's early trading, the New Zealand currency declined to an 8-day low of 63.33 against the Japanese yen. The next downside target level for the kiwi is seen around 62.9. The kiwi-yen pair closed yesterday's deals at 64.10.

The kiwi has lost around 4% against the yen after hitting a 10-month high of 65.98 on August 10.

On the other hand, the NZ dollar edged higher to 1.2398 against the Australian currency during Wednesday's Asian deals. The kiwi is presently trading at 1.2417 against the aussie, with 1.236 seen as the next target level. The aussie-kiwi pair closed Tuesday's New York deals at 1.2436.

In economic news from Europe, the French CPI and current account, Italian CPI, Euro-Zone industrial production are due for release.

Aside from the Fed's interest rate decision and economic commentary today, traders will look to the data on the trade balance for June from the Commerce Department at 8:30 AM ET. Economists estimate that the trade gap widened to $28.5 billion in the month.

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