Australian Dollar Drops to One-Month Low After Economy Shrinks

[Enivid]

Australia’s dollar fell to a one- month low after a government report showed the economy unexpectedly shrank last quarter, adding pressure on the central bank to resume interest-rate cuts. New Zealand’s dollar slid.

Australia’s currency also weakened against the yen after a separate report showed demand for services shrank in February at a faster pace. New Zealand’s currency declined versus the greenback after a measure of commodity export prices dropped for a seventh straight month. The currencies pared losses on speculation Chinese Premier Wen Jiabao will announce a new stimulus package tomorrow.

The GDP number “dealt quite a severe blow to the Aussie dollar, more so because the risk was skewed to the upside,” said Mitul Kotecha, head of global foreign-exchange strategy in Hong Kong at Calyon, the investment-banking unit of French bank Credit Agricole SA. “The general environment continues to be one of high risk aversion, a strong U.S. dollar, and that’s playing negatively for the Aussie as well.”

Australia’s currency fell as low as 62.86 U.S. cents, the weakest since Feb. 3, before trading down 1.4 percent at 63.28 cents as of 4:56 p.m. in Sydney from late in Asia yesterday. The currency slumped 0.7 percent to 62.28 yen. New Zealand’s dollar slid 0.7 percent to 49.50 U.S. cents, and was little changed at 48.71 yen.

The Australian currency may fall toward 62 U.S. cents in the next week, Kotecha said.

The Bureau of Statistics said Australia’s gross domestic product fell 0.5 percent in the three months to Dec. 31, when analysts had forecast 0.2 percent growth. Only three of 23 economists polled by Bloomberg News forecast a contraction, three expected a flat reading and 17 estimated growth.

From Bloomberg News.

[Pinalli]

Thats right!! Even i read the same at the source. I believe Tte Australian Dollar gave back some its big gains from Tuesday early in the session but later recovered after data showed that the Australian GDP reports shocked the market by showing that the economy contracted for the first time in eight years last quarter.