The Australian dollar fell below parity with its U.S. counterpart for the first time in more than six weeks after a survey indicated Chinese manufacturing may continue to weaken.
The New Zealand dollar touched the lowest level in nearly four months against the U.S. currency after a government report showed second-quarter growth missed economists’ estimates. The so-called kiwi declined against most major peers and interest- rate swaps slid to a record after Reserve Bank of New Zealand Governor Alan Bollard said he’s in no hurry to raise interest rates. Demand for both South Pacific currencies was also diminished as Asian stocks extended a global rout on European debt concerns.
“The key issue is the current appraisal of a much softer global economic environment and the impact that’s having on the Australian economy,” said Tim Riddell, Singapore-based head of global markets research for Asia at Australia & New Zealand Banking Group Ltd. “China is going to have an impact on sentiment towards the Aussie because the Aussie is seen as a freely tradable proxy for the growth profile in, particularly, China because of its resource need.”
Australia’s dollar fell to as low as 99.94 U.S. cents before trading at $1.0026 as of 3:58 p.m. in Sydney from $1.0043 yesterday in New York. The last time the currency fell below parity was on Aug. 9. The so-called Aussie fetched 76.98 yen from 76.76.
New Zealand’s currency dropped to 79.97 U.S. cents from 80.14, after slumping to 79.40, the least since May 25. It bought 61.41 yen from 61.27, after touching 60.95, the lowest level since March 25.
New Zealand Swaps
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates based on three-month bill rates, dropped as low as 3.092 percent, its lowest level since at least 1993, when Bloomberg started collating the data. Swaps are often used to speculate on changes in interest rates.
The MSCI Asia Pacific Index of stocks fell 3.5 percent, poised for its lowest close since July 2010. The MSCI World Index lost 2.1 percent yesterday and the Standard & Poor’s 500 Index sank 2.9 percent.
China’s manufacturing may contract for a third month in September as measures of export orders and output decline. A preliminary reading of 49.4 for a manufacturing index released by HSBC Holdings Plc and Markit Economics today compares with final readings of 49.9 for August and 49.3 for July. A reading below 50 indicates a contraction.
China is Australia’s largest trading partner and New Zealand’s second-biggest export market.
Economic Growth
New Zealand’s economy expanded 0.1 percent in the second quarter from the January-March period, Statistics New Zealand said today in Wellington. That was less than all but one of 15 forecasts in a Bloomberg News survey of economists.
“With uncertainty surrounding the globe and the sluggish domestic economy, the market expects a rate increase to be delayed, which keeps people away from the New Zealand dollar,” said Toshiya Yamauchi, a senior currency analyst in Tokyo at Ueda Harlow Ltd., which provides margin-trading services.
New Zealand’s dollar fell for a fourth day against the greenback after the RBNZ’s Bollard signaled the central bank will take time to raise interest rates.
Global Risks
“Why didn’t we move to increase rates last time; because of the significant global risks out there,” Bollard said yesterday in New York. “We are not being particularly impacted in the short term by these risks, but we are a big global trader and we know that when Lehman’s happened on this side of the world in 2008, we had about 30 seconds before it hit New Zealand.”
Benchmark interest rates are 4.75 percent in Australia and 2.5 percent in New Zealand, compared with as low as zero in the U.S. and Japan. Investors are attracted to the South Pacific nations’ higher-yielding assets, although the risk is that currency market moves will erase profits.
Losses in the Australian dollar were limited as traders speculated the currency may be oversold. The Aussie was 4 percent below its 21-day moving average against the greenback, while the kiwi was down 3.9 percent from the average.
“For the near term, the Aussie and kiwi have been sold excessively,” said Ueda Harlow’s Yamauchi. “A currency often rebounds when it declines about 3 percent from its 21-day moving average.”
The Australian dollar will rally to $1.04 by the end of the year, based on the median forecast of analysts in a Bloomberg News survey. A separate poll shows the New Zealand dollar may rise to 82 U.S. cents in the fourth quarter.
Reserve Bank of Australia Deputy Governor Ric Battellino said there are “grounds for optimism” that his nation’s economy will weather a U.S. slump.
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