“The Australian and New Zealand dollars fell, halting two days of gains, after an unprecedented levy on Cypriot banks raised concern a new round in Europe’s debt crisis will damp demand for higher-yielding assets.
Australia’s currency touched a one-week low against the yen and local bonds rallied after Cypriot President Nicos Anastasiades bowed to demands by euro-area finance ministers to raise 5.8 billion euros ($7.5 billion) by taking a piece of every bank account in Cyprus. Losses in the so-called Aussie were limited before the Reserve Bank of Australia releases minutes of its latest meeting tomorrow.
“Aussie, kiwi opened this week’s trade quite a bit lower,” said Peter Dragicevich, a Sydney-based currency economist atCommonwealth Bank of Australia (CBA), the nation’s largest lender. “Whilst there are no direct linkages between Australia, New Zealand and Cyprus, the currencies are reacting to changes in market sentiment. There could be some fears in the market that if another sovereign required a bailout, they may tax the deposits of that particular country as well.”
The Australian currency fell 0.5 percent to $1.0358 as of 4:19 p.m. in Sydney from March 15, when it touched $1.0415, the highest since Feb. 5. It dropped 1.1 percent to 98.06 yen, after earlier touching 97.06, the lowest since March 7.
The New Zealand dollar weakened 0.4 percent to 82.37 U.S. cents. The currency, nicknamed the kiwi, touched 77.01 yen, the lowest since March 5, before trading at 77.96, down 1.1 percent from last week.
Australia’s three-year bond yield fell 18 basis points, or 0.18 percentage point, to 2.94 percent. The 10-year yield declined 16 basis points to 3.47 percent. New Zealand’s 10-year rate slid nine basis points to 3.71 percent.
