Australian Dollar Falls as Home-Loan Demand, Confidence Drops

By Ron Harui

July 9 (Bloomberg) -- The Australian dollar fell and bonds rose after a government report showed home-loan approvals slid by the most in eight years and a private-sector survey of consumer confidence dropped to the lowest level since 1992.

The local dollar weakened against 15 of the 16 most-traded currencies as traders pared bets the central bank will raise interest rates from a 12-year high. Australia's dollar slid below 95 U.S. cents for the first time in almost three weeks as the slump in the number of loans granted to buy or build new homes declined four times as much as economists forecast in May.

``The market is probably a little bit sensitive to this sort of negative news, so it does appear as though we might see the Aussie a little bit lower,'' said Jim Vrondas, manager of corporate business at online foreign-exchange dealer OzForex Ltd. in Sydney, referring to the currency by its nickname.

Australia's currency fell to 95.03 U.S. cents at 12:04 p.m. in Sydney from 95.23 cents in late Asian trading yesterday. It reached 94.96 cents, the weakest level since June 24.

Home-loan approvals dropped 7.9 percent from April, when they declined a revised 4.2 percent, the statistics bureau said in Sydney today. It was the fourth straight monthly decrease. The median estimate in a Bloomberg News survey of 21 economists was for a 2 percent decrease in loan approvals.

Australia's consumer sentiment index fell 6.7 percent from June to 79 points, according to a Westpac Banking Corp. and Melbourne Institute survey. That was the sixth straight reading of less than 100, showing pessimists outnumber optimists.

Traders have assigned 28 percent odds to the Reserve Bank of Australia raising its 7.25 percent benchmark interest rate by a quarter-percentage point in the next 12 months, according to a Credit Suisse Group index based on trading in interest-rate swaps. The probabilities were 36 percent yesterday and 72 percent a week ago.

Australian two-year government bonds climbed for a fifth day, pushing the yield down 1 basis point to 6.69 percent. A basis point is 0.01 percentage point.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net;