By Candice Zachariahs
Feb. 11 (Bloomberg) -- The Australian and New Zealand dollars slumped the most in a month against the Japanese yen as U.S. equities slid, damping demand for higher-yielding assets.
The currencies fell versus the U.S. dollar after Treasury Secretary Timothy Geithner pledged government financing for as much as $2 trillion of efforts to spur new lending. Australian consumer confidence slumped in February, a report showed today.
“There’s broad brush strokes and good-feeling words, but the reality that you need a plan like this is not good for markets and not good for holding risk,” said Alex Sinton, a senior currency dealer at ANZ National Bank Ltd. in Auckland. The Australian dollar will find support at 64.70 U.S. cents and New Zealand’s at 51.69 cents, he said.
Australia’s currency slid for a second day, falling 1.7 percent to 65.71 U.S. cents as of 10:40 a.m. in Sydney from 66.85 cents late in Asia yesterday. The currency declined as much as 4.1 percent to 58.46 yen, the biggest drop since Jan. 8, before trading at 59.40 yen.
New Zealand’s dollar slipped 2.1 percent to 52.40 U.S. cents from 53.51 in Asia yesterday. It bought 47.37 yen from 48.82.
Currency movements in Asia may be volatile as a national holiday in Japan reduces liquidity, Sinton said.
The Standard & Poor’s 500 Index dropped the most since President Barack Obama’s inauguration on concern the plan won’t stop an extended recession in the world’s largest economy.
Benchmark interest rates of 3.25 percent in Australia and 3.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero percent in the U.S. attract investors to the South Pacific nations’ assets. The risk in such trades is that currency market moves will erase profits.
Australian Sentiment
A sentiment index in Australia declined 4.6 percent to 85.8 points, according to a Westpac Banking Corp. and Melbourne Institute survey of 1,200 consumers conducted between Feb. 2 and Feb. 8 and released today in Sydney. The index has held below 100 since February 2008, indicating pessimists outnumber optimists, as rising unemployment and falling property prices sap household confidence.
Reserve Bank of Australia Governor Glenn Stevens yesterday said a worldwide retreat from risk-taking would be “even more damaging than what we have seen to date,” in a speech in Kuala Lumpur, Malaysia. “The problem in the next couple of years will not be too many cross-border capital flows, but too few; not too much risk-taking, but too little,” he said.
The RBA lowered borrowing costs to a 45-year low this month in an effort to boost domestic demand while the Australian government announced a A$42 billion ($28 billion) stimulus package.
Bond Sales
Australia sold A$601 million of 2013 bonds at a weighted average yield of 3.46 percent today in the second auction of its expanded borrowing program to raise as much as A$24 billion in five months.
Buyers bid for 2.6 times the amount offered in the sale of 6.5 percent bonds, the Australian Office of Financial Management said today. That matched the so-called bid-to-cover ratio at the Feb. 6 sale of April 2015 securities.
Australian government bonds rose for a third day with the yield on the 10-year note falling six basis points, or 0.06 percentage point, to 4.28 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 advanced 0.496, or A$4.96 per A$1,000 face amount, to 107.885.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.36 percent from 3.48 yesterday.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
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