Australian, N.Z. Dollars Fall


Australia's dollar fell to a four- month low and New Zealand's dollar dropped to the weakest in almost two years against the yen as commodity prices declined and a Japanese government report showed the economy contracted.

Australia's dollar dropped for a fourth day and New Zealand's dollar weakened for a second on speculation slowing growth in the world's second-largest economy will spur Japanese investors to sell higher-yielding assets abroad. The currencies also fell against the U.S. dollar on concern that economic expansion in the South Pacific nations will slow as the prices of raw materials extended their slide.

The Australian dollar slipped to 93.15 yen, the lowest since April 15, before trading at 94.29 yen as of 4:45 p.m. in Sydney from 96.29 yen late in Asia yesterday. The currency also declined to 86.82 U.S. cents from 87.38 cents. It reached 85.93 cents, the weakest since Jan. 23.

The New Zealand dollar declined to 73.99 yen, the lowest since Aug. 25, 2006, before trading at 75.17 yen from 76.67 yen late in Asia yesterday. The currency, called the kiwi, also fell to 69.23 U.S. cents from 69.56 cents. It touched 68.26 cents, the weakest since Aug. 17.

The Australian and New Zealand dollars were the second and third-worst performers among the 16 most-active currencies against the yen in Asian trading after Japan's Cabinet Office said the economy shrank an annualized 2.4 percent in the second quarter, bringing the country to the brink of its first recession in six years.

Japanese individual investors have reduced their holdings of the Australian and New Zealand dollars against the yen, Tokyo Financial Exchange data show. Net-long positions on the so- called Aussie were 89,663 contracts yesterday, down from 89,908 contracts on Aug. 11, while net-long positions on the kiwi were 182,006 contracts, down from 187,293 contracts. The contracts are denominated in 10,000 units of the foreign currency.

Benchmark interest rates of 7.25 percent in Australia and 8 percent in New Zealand compare with 0.5 percent in Japan and 2 percent in the U.S., making the South-Pacific currencies popular targets for international investors seeking higher returns.

The Aussie fell to its lowest in 6 1/2 months and the kiwi reached its weakest in a year versus the U.S. dollar after the UBS Bloomberg Constant Maturity Commodity Index of 26 commodities slid for a third day. Raw materials account for 60 percent of Australia's exports, and sales of commodities make up 70 percent of New Zealand's overseas shipments.

Australia's currency has declined 8 percent against the U.S. dollar this month as investors bet the Reserve Bank of Australia will reduce borrowing costs from a 12-year high to support the slowing economy.

The kiwi has lost 5.8 percent against the U.S. dollar in August as traders bet the Reserve Bank of New Zealand will also cut interest rates to bolster economic growth. The RBNZ lowered its benchmark by a quarter-percentage point on July 24, the first reduction in five years.


TradingEconomics.com, Bloomberg
8/13/2008 6:47:10 AM