Antipodean Currencies Fall As Moody's Downgrades China Rating

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.