Australia's Dollar Falls to Three-Week Low

The Australian dollar fell to the lowest in three weeks as prices of commodities the nation exports declined and the U.S. currency rallied in New York.

The local dollar weakened against 14 of the 16 most-traded currencies as gold, the nation's third most-valuable raw material export after coal and iron ore, led a slump in metals. Crude oil, Australia's fourth-largest overseas shipment, dropped to a 12- week low. The U.S. dollar rose the most versus the euro in almost four weeks after a Conference Board report showed consumer confidence increased in July.

Australia's currency fell 0.8 percent to 95 U.S. cents at 10:50 a.m. in Sydney, from 95.76 cents late in Asia yesterday. It touched 94.99 cents, the lowest since July 9. The currency may weaken to 94.80 cents today, said Body. The Aussie, as the currency is known, bought 102.69 yen, from 103.12 yen yesterday.

The Aussie dropped for a second day against the dollar after the UBS Constant Maturity Index of 26 raw materials slid 0.9 percent in New York to its lowest reading since May 2.

The U.S. dollar strengthened yesterday after an increase in consumer confidence. Merrill Lynch & Co.'s plan to sell $8.5 billion of stock and liquidate bonds raised speculation that Wall Street has seen the worst of the credit crisis.

Australia's currency has fallen 0.7 percent since the start of this week and 3.4 percent from a 25-year high of 98.49 cents on July 16 after National Australia Bank Ltd. and Australia & New Zealand Banking Group Ltd. reported they were setting aside cash for bad loans.

Australia is seeing ``its own version of the credit crunch come through,'' said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. ``The pullback was overdue given all the negatives that had been accumulating over the last few days.'' It may weaken to 92 cents in three months, he said.

Australia, Bloomberg
7/29/2008 8:24:04 PM