Australian Dollar Falls on Concern Over Bird Flu in Indonesia
May 24 (Bloomberg) -- The Australian dollar weakened as the death of seven Indonesian family members of bird flu sparked concern of a human-to-human outbreak, prompting investors to seek the relative safety of U.S. dollars.
The local currency fell from its highest this week as the World Health Organization launched an investigation and said it may consider raising a pandemic alert. Almost all of the H5N1 virus cases confirmed by the WHO since late 2003 can be traced to direct contact with sick or dead birds. At least 124 of 218 people known to have been infected died, the WHO said yesterday.
``We're gripped by risk aversion, which is certainly not a good environment for the Australian dollar,'' said Robert Rennie, chief currency strategist at Westpac Banking Corp. in Sydney.
Australia's currency fell to 75.17 U.S. cents as of 3:08 p.m. in Sydney from 75.46 cents in late Asian trading yesterday. It may fall toward 74 cents in the next month, Rennie said.
Australia's dollar also dropped versus the Swiss franc, a currency that also typically benefits in times of uncertainty. The currency bought 0.91 Swiss francs from 0.9122 yesterday.
A flu pandemic such as the one that killed 50 million people in 1918 may take more than 142 million lives and cause the world's economy to shrink by one-eighth, according to a report in February by the Lowy Institute and Australian National University.
World Bank President Paul Wolfowitz in October said there would be ``severe'' economic costs if bird flu becomes transferable between humans.
`Smashed'
``Because Indonesia is in the same region as Australia, and the Australian dollar is a liquid currency, it's the currency that's getting smashed,'' said Stephen Koukoulas, chief Asia- Pacific strategist at TD Securities Ltd. in Sydney.
The Australian dollar earlier rose as high as 75.94 cents as the price of commodities the country sells abroad rebounded for a second day. Copper climbed 12 percent in London, the most ever. Gold had its biggest gain in two weeks in New York.
The advance in commodities extended into Asian trading, with copper and aluminum futures contracts in Shanghai rising by their maximum daily limit. Australia's dollar is typically influenced by the price of commodities because exports of raw materials contribute about 10 percent to Australia's economy.
`Straw That Broke Its Back'
``The Australian dollar was sitting on its highs and was vulnerable to any adverse news,'' said Adrian Foster, a currency strategist at Dresdner Kleinwort Wasserstein in Singapore. Bird flu ``was the straw that broke its back.''
Australia's dollar was little changed after an index of leading economic indicators rose in March for an eighth straight month amid gains in building approvals and the stock market.
The leading index, a gauge of growth for the next three to nine months, rose 0.8 percent to 237.8, Westpac Banking Corp. and the Melbourne Institute said in Sydney. The index's annualized growth rate was 4.7 percent, which is above its long-term trend of 3.8 percent.
Australia's dollar has risen 2.5 percent this year amid speculation the Reserve Bank of Australia may add to its March increase to its overnight cash rate target of 5.75 percent.
Australian government bonds were unchanged. The yield on the 10-year bond gained was 5.69 percent.
To contact the reporter on this story:
Chris Young in Sydney at
cyoung12@bloomberg.net.
Last Updated: May 24, 2006 01:10 EDT
N.Z. Dollar Rises as Investors Judge Two-Week Drop Is Overdone
May 24 (Bloomberg) -- New Zealand's dollar rose as investors judged the currency's 3.3 percent decline over the past two weeks was too much given the central bank is unlikely to lower interest rates any time soon.
The currency has recovered 1.7 percent since falling to a five-week low on May 22. Central bank Governor Alan Bollard last month said he is unlikely to cut New Zealand's benchmark rate from a record high. Seven of 14 economists surveyed by Bloomberg News expect Bollard will keep the rate unchanged until at least Sept. 30, supporting demand for local assets.
``It was a corrective move,'' said Alex Sinton, senior foreign-exchange dealer at ANZ Investment Bank in Auckland. ``A lot of negatives had already been priced into the New Zealand dollar pulling it down, and the rubber band snapped back.''
New Zealand's dollar rose to 62.51 U.S. cents at 4:10 p.m. in Wellington from 62.36 cents in late Asian trading yesterday.
Bollard has raised interest rates nine times to 7.25 percent since January 2004 to curb spending and a housing boom, which fanned inflation in the $108 billion economy. The rate compares with 5 percent in the U.S. and the European Central Bank's 2.5 percent.
New Zealand's 10-year bonds yield 5.80 percent compared with 5.02 percent in U.S. Treasuries and about 3.93 percent for German bunds.
``The retail investor is still getting high yields in New Zealand in comparison to other countries,'' said Tim Bowring, an economist at Macquarie Bank Ltd. in Sydney, though he forecasts the local dollar falling to 60 cents as the economy slows.
New Zealand's economy is going through a correction, the Paris-based Organization for Economic Cooperation and Development said. New Zealand's economy may grow just 1.3 percent this year, the second-lowest rate after Portugal, lagging behind the 3.1 percent average of the 30 nations surveyed.
The currency rose to a two-week high Against the Australian dollar, buying 83.27 Australian cents.
To contact the reporter on this story:
David McIntyre in Sydney at
Dmcintyre2@bloomberg.net.
Last Updated: May 24, 2006 00:12 EDT
