Australian, New Zealand Dollars Decline Versus Peers Before Europe Summit

By Kristine Aquino - Jan 30, 2012 7:50 AM GMT+0700

The Australian and New Zealand dollars weakened before European Union leaders meet to discuss the region’s debt crisis at a summit in Brussels today.

The so-called Aussie slid versus all of its 16 major counterparts amid concern Italy’s funding costs will surge at an auction today after Fitch Ratings cut the nation’s credit grade last week. New Zealand’s currency, nicknamed the kiwi, halted its longest advance in 10 months as Asian stocks fell, extending a global slump in shares.

“We’re still quite a long way from solving the issues in Europe and market cynicism can certainly raise its ugly head again,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest-rate risk-management company. “Before the Aussie and kiwi get some support again, you’re going to need to see a bit of a dip.”

Australia’s dollar declined 0.4 percent to $1.0613 as of 11:40 a.m. in Sydney, and slipped 0.3 percent to 81.47 yen. New Zealand’s currency fell 0.3 percent to 82.26 U.S. cents, ending a six-day advance, the longest since March. It slid 0.2 percent to 63.16 yen.

The MSCI Asia Pacific Index lost 0.4 percent. The Standard & Poor’s 500 Index dropped 0.2 percent on Jan. 27 and the Stoxx Europe 600 Index retreated 1 percent.

Australian bonds rose, pushing the yield on benchmark 10- year securities down two basis points, or 0.02 percentage point, to 3.79 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell 2 1/2 basis points to 2.775 percent.

EU heads of government will meet in the Belgian capital today to put the finishing touches on a German-led deficit- control treaty and endorse the statutes of a 500 billion-euro ($660 billion) rescue fund to be set up this year.

Italy is scheduled to sell debt maturing in 2016, 2017, 2021 and 2022 today. Fitch reduced the nation’s credit score two levels to A- from A+. Spain was lowered two notches to A from AA-. Ratings on Belgium, Slovenia and Cyprus were also cut, while Ireland’s was maintained.

To contact the reporter on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net