The Australian and New Zealand currencies slid for the sixth time in seven days against the U.S. dollar on concern Europe’s debt crisis will spread. The so-called Aussie extended last week’s biggest weekly decline since October 2008 after Rio Tinto Group, Australia’s biggest exporter of iron ore, said a proposed mining profits tax acted as a “wet blanket” on its investment plans in the nation. European Union finance ministers last week pledged to stiffen sanctions on high-deficit countries and ruled out setting up a mechanism to manage state defaults.
“If Europe deteriorates further both Aussie and kiwi will fall,” said Imre Speizer, a market strategist in Wellington at Westpac Banking Corp., Australia’s second-largest lender. “Another wave of euro fear will affect the Aussie more than it will the kiwi.
Australia’s currency fell 0.6 percent to 82.67 U.S. cents as of 1:53 p.m. in Sydney from 83.18 cents in New York last week, when it completed a 6.1 percent drop. The Aussie touched 80.73 cents on May 21, the least since July 2009. It slid 0.6 percent to 74.51 yen. New Zealand’s dollar weakened 0.8 percent to 67.29 U.S. cents and was at 60.66 yen from 61.08 yen.
The Aussie has dropped about 11 percent in May, the worst performing currency against the greenback among its 16 most- active counterparts.
Australia’s currency will find support near 81 U.S. cents, while New Zealand’s dollar may be bought as it heads toward 66 cents, according to Speizer.
Rio, Futures
The Aussie fell against 11 of its 16 most-traded currency peers as Rio said it will be shifting resources away from Australia after the government proposed a 40 percent profits tax on resource projects. Tom Albanese, chief executive officer of the London-based company, made the comments today on a media call.
“The imposition of higher taxes may cloud prospects for the Australian economy and interest rates there, which have so far had a big advantage,” said Soichiro Mori, a strategist in Tokyo at FXOnline Japan Co., a margin-trading company. “Such concerns prompts margin traders to unwind long positions on the Aussie.”
Traders cut bets for a fifth week that the Australian dollar will gain versus the U.S. currency, figures from the Washington-based Commodity Futures Trading Commission show.
The difference in the number of wagers by hedge funds and other large speculators on a gain in the Australian dollar compared with those on a drop was 38,380 on May 18, compared with net longs of 49,198 a week earlier.
Nervous Markets
“There’s a lot of nervousness in markets,” said Derek Mumford, a Sydney-based senior consultant at HiFX, a foreign exchange risk management firm. “The 80-cent level certainly can be challenged again and if that breaks and you still see equity markets coming off we could see it sub-80,” he said, referring to the Australian dollar.
The MSCI Asia Pacific Index has fallen 11 percent this month and the Reuters/Jefferies CRB Index of 19 raw materials headed has weakened 9.5 percent.
Declines of as much as 1.6 percent in the Aussie and 1.3 percent in the kiwi dollar were tempered as China’s stocks rose. The Shanghai Composite Index gained by the most in seven months on speculation the government will abstain from further measures to cool the property market amid Europe’s debt crisis.
China and the U.S. start talks in Beijing today. The Strategic and Economic Dialogue will discuss yuan revaluation, Europe’s debt and North Korea’s nuclear program. China is Australia’s largest trading partner and New Zealand’s second- biggest export market. Australian government bonds rose for a fourth day. The yield on 10-year notes fell four basis points, or 0.04 percentage point, to 5.35 percent, according to data compiled by Bloomberg. The price of the 4.5 percent security due April 2020 gained 0.32, or A$3.20 per A$1,000 face amount, to 93.55.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 4.27 percent from 4.29 last week.