Antipodean Currencies Fall As Moody's Downgrades China Rating
May 24 2017 - 12:07AM
RTTF2
Antipodean currencies such as the Australian and the New Zealand
dollars weakened against their major counterparts in the Asian
session on Wednesday, after news that Moody's Investors Services
downgraded China's sovereign credit rating to A1 from Aa3 and
changed its outlook to stable from negative.
China is Australia's and New Zealand's biggest trading
partner.
Moody's downgraded China's long-term local currency and foreign
currency issuer ratings by one notch to A1 from Aa3 and changed the
outlook to stable from negative, due to concerns over the rising
debt and slow growth and reforms as the government tries to
implement a shift to economic expansion driven by domestic demand
than exports.
The rating downgrade was the first from Moody's since 1989. The
country's outlook was lowered in March 2016 to negative.
The downgrade reflects expectation that China's financial
strength will erode somewhat over the coming years, with
economy-wide debt continuing to rise as potential growth slows, the
agency said in a statement.
Meanwhile, gains are muted as investors look ahead to the
release of minutes of the U.S. Federal Reserve's monetary policy
meeting later today.
In other economic news, data from Westpac Bank showed that a
leading index for the Australian economy declined in April, easing
0.12 percent. That follows the 0.08 percent increase in March.
Data from the Australian Bureau of Statistics showed that the
total value of construction work completed in Australia was down a
seasonally adjusted 0.7 percent on quarter in the first three
months of 2017, standing at A$46.416 billion. That missed forecasts
for a decline of 0.5 percent following the 0.2 percent contraction
in the previous three months.
Data from the Statistics New Zealand showed that New Zealand saw
a merchandise trade surplus of NZ$578 million in April. That beat
forecasts for a surplus of NZ$267 million following the NZ$332
million surplus in March.
Exports climbed 9.8 percent on year to NZ$4.75 billion, also
exceeding expectations for NZ$4.40 billion and up from NZ$4.65
billion in the previous month. Imports gained an annual 4.9 percent
to NZ$4.17 billion versus forecasts for NZ$4.10 billion and down
from NZ$4.31 billion a month earlier.
In the Asian trading, the Australian dollar fell to nearly a
2-week low of 1.0629 against the NZ dollar and a 2-day low of
0.7443 against the U.S. dollar, from yesterday's closing quotes of
1.0664 and 0.7475, respectively. If the aussie extends its
downtrend, it is likely to find support around 1.05 against the
kiwi and 0.72 against the greenback.
The aussie dropped to 83.24 against the yen, from an early
1-week high of 83.71. The aussie is likely to find support around
the 81.00 region.
Against the euro and the Canadian dollar, the aussie edged down
to 1.5020 and 1.0075 from yesterday's closing quotes of 1.4953 and
1.0100, respectively. On the downside, 1.47 against the euro and
0.99 against the loonie are seen as the next support levels for the
aussie.
The NZ dollar fell to 1.5996 against the euro and 0.6989 against
the U.S. dollar, from yesterday's closing quotes of 1.5946 and
0.7009, respectively. If the kiwi extends its downtrend, it is
likely to find support around 1.62 against the euro and 0.68
against the greenback.
Against the yen, the kiwi dropped to 78.18 from an early high of
78.50. The kiwi is likely to find support around the 76.00
region.
Looking ahead, U.S. house price index for March, existing home
sales data for April and U.S. crude oil inventories data are due to
be released in the New York session.
At 8:45 am ET, European Central Bank President Mario Draghi is
expected to speak at the First Conference on Financial Stability
organised by Bank of Spain, in Madrid.
At 10:00 am ET, the Bank of Canada will announce its key policy
interest rate. The economists expect the interest rate to remain
unchanged at 0.50 percent.
At 2:00 pm ET, Federal Open Market Committee will release the
minutes from its May policy meeting in Washington.
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