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Wednesday in Asia, the Australian and the New Zealand dollars slumped against their key counterparts as most Asian stocks declined after a dip in U.S. consumer confidence revived worries about the strength of the global economic recovery.
The U.S. consumer confidence index fell to 47.7 in October from a revised 53.4 in September, falling well short of the 53.5 expected by economists. The reading was also notably lower than the 53.1 originally reported for the previous month.
Conference Board's weaker-than-expected U.S. consumer confidence index for October raised concern about the U.S. earnings potential of Asian companies, driving shares lower across the region.
Japan's Nikkei 225 index lost 1.2%, South Korea's Kospi declined 0.9%, China's Shangai Composite index dropped 1.1%, Hong Kong Hang Seng slipped 1.7%, Australia's S&P/ASX 200 index shed 1%.
However, the New Zealand stocks are trading flat today.
The Aussie, which closed yesterday's trading at 0.9162 against the U.S. currency plunged to a 2-week low of 0.9075 in Asian deals on Wednesday. The next downside target level for the aussie-greenback pair is seen at 0.899.
The Aussie slipped today as inflation data made investors reduce their bets on an aggressive rate rise.
Australia's consumer prices rose at a slower yearly pace in the three months ended September, the Australian Bureau of Statistics said today. However, on a quarterly basis, consumer prices climbed at a faster pace than in the previous quarter.
The consumer price index climbed 1.3% year-on-year in the third quarter, slower than the 1.5% rise in the second quarter, but came in slightly above economists' expectations for a 1.2% increase. This marks the slowest annual gain in consumer prices since the second quarter of 1999.
On a quarterly basis, consumer prices were up 1% in the third quarter, faster than the 0.5% rise in the previous quarter and slightly above expectations for a 0.9% increase.
Earlier in the month, Governor Glenn Stevens became the first G-20 central bank chief to raise the benchmark interest rate since the onset of the global crisis, with a 25 basis points hike to 3.25% from a 49-year low of 3.00%, saying that a "very expansionary policy was no longer necessary, and possibly imprudent".
The central bank chief has stressed the need to move away from emergency settings for monetary policy, with the Australian economy experiencing only a modest downturn in the face of the financial crisis.
The aussie-greenback pair that jumped to 14 - 1/2 -month high of 0.9330 on October 21 has lost around 3% since then.
During Asian deals on Wednesday, the Aussie slipped to 82.74 against the yen. This set the lowest point for the Australian currency since October 15. On the downside, 81 level is seen as the next target for the aussie-yen pair. The pair was worth 84.11 at yesterday's close.
After hitting more than a year high of 85.36 against the yen on October 23, the aussie has dropped 3.1%.
The Aussie declined to a 2-day low of 0.9686 against the Canadian dollar in Asian deals on Wednesday. If the aussie-loonie pair slides further, it may test support around the 0.935 level.
The Canadian dollar was under pressure earlier this week as the head of the nation's central bank reiterated concern the currency has grown too strong.
The Bank of Canada Governor Mark Carney stepped up warnings he issued last week in a policy meeting and a quarterly report that its increasing strength is a threat to economic recovery.
A Canadian currency with greater strength than policy makers assumed could be a "significant further drag on growth and put additional downward pressure on inflation," Carney said in his speech in Montreal yesterday.
Carney reiterated the central bank's economic outlook and its commitment to keep the benchmark lending rate at a record low 0.25 percent through June 2010.
The Canadian dollar's decline helped aussie reach a 15-month high of 0.9845 in European deals yesterday. But the Australian currency pared its gains in the New York session and the aussie-loonie pair closed yesterday's trading at 0.9758.
The Aussie that gained against the euro in early Wednesday Asian deals lost ground after hitting an 8-day high of 1.6106 at 8:30 pm ET. The aussie thus fell to a 13-day low of 1.6325 per euro by about 12:05 am ET. On the downside, 1.640 is seen as the next target level for the Australian currency.
The NZ dollar also weakened along with the Aussie on the back of weak Asian equities. Benchmark interest rates are 3.25 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S..
In economic news, New Zealand's business confidence dipped slightly in October after reaching a ten-year high in September.
The latest survey from the National Bank showed today that a net 48.2% firms expect general business conditions to improve in the next 12 months, lower than a net 49% in September. Confidence levels improved in the construction sector, but dropped across the manufacturing, services and retail sectors.
The New Zealand dollar, which closed yesterday's trading at 0.7447 against the US currency fell to a 12-day low of 0.7371 in Asian deals on Wednesday. The next downside target level for the kiwi-greenback pair is seen at 0.735.
The Reserve Bank of New Zealand is scheduled to announce its interest rate decision tomorrow. Analysts expect the central to keep rates steady at 2.5%.
The RBNZ Governor Alan Bollard on September 10 said he expected to keep the cash rate at or below 2.5 percent until the "latter part" of 2010 because the economy's recovery was just getting under way and needed more stimulus.
During Asian deals on Wednesday, the New Zealand dollar slipped to a 9-day low of 67.20 against the yen. If the kiwi-yen pair weakens further, it may target the 67.0 level. At yesterday's close, the pair was quoted at 68.38.
Retail sales in Japan fell 1.4 percent on year in September, the Ministry of Trade, Economy and Industry said today, declining for the 13th straight month to come in at 10.544 trillion yen.
That was slightly better than the 1.6 percent annual decline that analysts had been expecting following the 1.8 percent contraction in August.
On a monthly basis, retail sales were up 0.9 percent versus forecasts for a 0.2 percent increase after the 1.0 percent gain in August. It was the third straight month of monthly gain.
The New Zealand dollar plummeted to a 9-day low of 2.0041 against the euro in Asian trading on Wednesday. This may be compared to yesterday's closing value of 1.9894. On the downside, 2.024 is seen as the next target level for the NZ currency.
The New Zealand dollar that dropped against the Aussie in early Wednesday Asian deals reversed direction after the Australian third quarter CPI report was published at 8:30 pm ET. The kiwi thus recovered from a 1-week low of 1.2348 to 1.2291 by about 10:55 pm ET. If the kiwi advances further, it may likely target the 1.2255 level. The aussie-kiwi pair closed yesterday's North American session at 1.2316.
In the upcoming European session, the German import price index for September and the Italian business confidence report for October have been slated for release.
From the U.S., the durable goods orders and the new home sales report-both for the month September are expected in the New York session.
Investors are also treading cautious path ahead of slew of earnings and economic reports due for release during the course of the week.
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