RTTNews - During Asian deals on monday, the Australian and New Zealand dollars plunged against their key counterparts as the weakness in Asian stock markets reduced demand for higher-yielding currencies.
Asian stock markets were trading weak today with a negative close on Wall Street last Friday on the back of some weak economic data prompting investors to indulge in some heavy selling. Disappointing GDP from Japan is weighing on the markets as well.
Most of the markets in the region started off on a weak note and have drifted further down in the red on renewed concerns about the pace of economic recovery. With investors choosing to tread a cautious path and looking to cash in on recent strong gains, stocks cutting across various sectors are feeling the heat in the Asian markets today.
Australian stocks ended 1.5% lower today, while the New Zealand market closed 2.1% down.
Other Asian markets also traded lower today, with Japan's benchmark Nikkei 225 Index declining 2.9%, South Korea's Kospi Composite falling 3% and Hong Kong's Hang Seng index trading 2.7% lower.
Benchmark interest rates are 3% in Australia and 2.5% in New Zealand, compared with 0.1% in Japan and as low as zero in U.S. When stocks gain, higher-yielding currencies such as the Australian and New Zealand dollars will advance and vice-versa.
The aussie declined to a 5-day low against its U.S., and European counterparts, an 18-day low against the Japanese yen and a 4-day low versus the Canadian dollar.
Against the US dollar, the Australian currency edged down to a 5-day low of 0.8191 during Asian deals on Monday. If the aussie falls further, 0.810 is seen as the next target level. The aussie-dollar pair closed Friday's North American session at 0.8317.
The aussie-dollar pair that climbed to a new multi-month high of 0.8480 on August 14 weakened thereafter and has lost around 3% thus far.
Friday, Reuters and the University of Michigan released their preliminary report on consumer sentiment in the month of August, showing that their consumer sentiment index unexpectedly decreased compared to the previous month.
The report showed that the consumer sentiment index fell to a reading of 63.2 in August from a reading of 66.0 in July. The decrease came as a surprise to economists, who had been expecting the index to increase to 69.0.
With the unexpected decrease, the consumer sentiment index fell for the second consecutive month, dropping to its lowest level since March.
During Asian deals on Monday, the Australian dollar declined to 1.7253 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 1.730. The euro-aussie pair is now worth 1.7231, compared to 1.7073 hit late New York Friday.
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 18-day low of 77.42 during today's Asian deals. The aussie-yen pair is presently trading at 77.54, with 76.2 seen as the next target level. The pair closed Friday's New York deals at 78.90.
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 5%.
The yen rose after a preliminary report released by Japan's Cabinet Office showed that Japan's economy grew for the first time in five quarters as a revival in exports and consumer spending helped the country climb out of its worst postwar recession.
The Cabinet Office said second quarter real GDP was up 0.9% compared to the previous quarter, a turnaround from a recession, which saw the economy contract in each of the previous four quarters. Economists had estimated 1% growth for the quarter. In the March quarter, GDP decined 3.1% following a 3.5% slump in the December quarter of 2008.
Annually, GDP rose 3.7% in the second quarter compared to the consensus, which called for 3.9% GDP growth.
The Australian dollar touched a 4-day low of 0.9066 against its Canadian counterpart during Asian trading on Monday. On the downside, 0.903 is seen as the next target level for the Australian currency. The aussie-loonie pair closed Friday's deals at 0.9142.
The Australian dollar that traded near a 6-week high of 0.9204 against the Canadian currency on Friday, has dropped around 1.2% since then.
The Canadian dollar slipped against most majors as oil prices fell below $67 a barrel today, extending the previous session's 4.3 percent decline, as poor U.S. economic data clouded the outlook for a quick global recovery and prompted further profit taking.
Oil fell by $3.01, or 4.27 percent on Friday -- the biggest loss since July 29 -- after the Reuters/University of Michigan Survey of Consumers showed consumer confidence in early August dropped to the lowest level since March.
U.S. crude oil futures fell 61 cents to $66.90 a barrel, while London Brent crude fell 46 cents to $70.98.
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 5-day low of 0.6686 during Asian deals on Monday. On the downside, 0.663 is seen as the next target level for the kiwi. The kiwi-dollar pair closed Friday's North American session at 0.6769.
The kiwi-dollar pair that advanced to a new multi-month high of 0.6890 on August 14 has lost around 3% since then.
The New Zealand dollar that closed Friday's New York deals at 2.0988 against the European currency slipped to a 4-day low of 2.1170 during Monday's early trading. If the New Zealand currency falls further, 2.136 is seen as the next target level.
The kiwi that advanced to a new multi-month high of 2.0768 against the European currency on August 14, weakened thereafter and has depreciated around 2% thus far.
During Monday's early trading, the New Zealand currency declined to a 5-day low of 63.18 against the Japanese yen. The next downside target level for the kiwi is seen around 62.7. The kiwi-yen pair closed last week's deals at 64.22.
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 1.2260 against the Australian currency during Monday's Asian deals. The kiwi is presently trading at 1.2279 against the aussie, with 1.220 seen as the next target level. The aussie-kiwi pair closed Monday's New York deals at 1.2300.
The Euro-zone trade balance report for June is expected in the upcoming European session.
From the U.S., the Treasury Department is due to release a report on the flows of financial instruments into and out of the U.S. for June at 9 am ET.
At 1:00 pm ET, the National Association of Homebuilders' is scheduled to release the results of their survey on homebuilders' confidence for August.
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