Aussie Dollar Falls for 4th Week on Lower Commodities, Rates

By Candice Zachariahs

Aug. 15 (Bloomberg) -- Australia's dollar headed for its fourth consecutive weekly decline, the longest losing streak since October 2006, as prices of commodities dropped and traders added to bets the central bank will reduce interest rates.

The currency slid 2 percent this week after gold, its third most valuable raw material export, dropped 5.8 percent. Reserve Bank of Australia Deputy Governor Ric Battellino said yesterday the central bank ``is in a position to consider'' cutting interest rates even before inflation slows.

``With the RBA reinforcing market expectations that they are likely to start lowering the official cash rate as soon as September, we remain bearish,'' Deutsche Bank AG currency strategists including London-based Bilal Hafeez and Sydney-based John Horner, wrote in a research note yesterday. ``We continue to target a fall to 85 U.S. cents on this move.''

Australia's dollar fell 0.6 percent to 87.05 U.S. cents at 8:19 a.m. in Sydney, compared with 87.61 cents in late Asian trading yesterday and from 88.85 cents in New York a week ago. It dropped to 85.93 cents on Aug. 13, the weakest since Jan. 23.

The currency dropped to 95.60 yen from 96.10 yen yesterday. It has slipped 2.4 percent against the yen this week, its fourth consecutive weekly decline.

Interest-Rate Bets

The Aussie, as the currency is nicknamed, was the second- worst performer among the 16 major currencies the past five days. Traders expect the RBA will cut its benchmark rate of 7.25 percent by 1.1 percentage points over the next 12 months according to a Credit Suisse Group index based on interest-rate swaps yesterday.

``We cannot wait to see a fall in inflation before we start cutting rates because by then it would be too late,'' Battellino told a parliamentary committee in Sydney yesterday. ``We try to be pre-emptive when we start tightening and pre-emptive when we start easing.''

Goldman Sachs Group Inc. revised its forecast for the Aussie yesterday, saying that the Australian and New Zealand dollars faced challenges on the ``domestic front from slowing activity.'' The firm now expects the currency to buy 86 cents in three months, compared with a pervious forecast of 96 cents.

Australia's dollar has fallen 11 percent versus the dollar this month as the UBS Bloomberg Constant Maturity Commodity Index of 26 raw materials has dropped 12.5 percent.

To contact the reporter on this story: Candice Zachariahs in New York at czachariahs1@bloomberg.net