Australian Dollar Falls to Six-Month Low

The Australian dollar fell to the lowest in six months after the central bank signaled it may reduce interest rates as economic growth slows.

Australia's currency extended its slump from a 25-year high touched last month to 10 percent after the Reserve Bank of Australia said there will be more room to lower borrowing costs because a ``significant moderation'' in domestic demand will curb growth and push up unemployment.

The Australian dollar declined to 88.37 U.S. cents, the weakest since Jan. 31, before trading at 88.60 cents as of 4:40 p.m. in Sydney, from 88.85 cents in New York on Aug. 8. It rose as high as 98.49 cents on July 16.

``Economic growth will be fairly slow in the period ahead,'' the RBA said in its quarterly policy statement released in Sydney today. Gross domestic product will probably expand 2 percent this year compared with 4.3 percent in 2007 and less than the 2.25 percent forecast by the bank in May, the RBA said.

The Australian and New Zealand dollars were two of 13 among the 16 most-traded currencies that fell against the U.S. dollar as an escalation in the armed conflict between Russia and Georgia encouraged safe-haven flows into U.S. assets.

Australian Dollar Falls to Six-Month Low, Bloomberg
8/11/2008 6:23:16 AM