Australian Dollar Extends Slide to 12th Day as Commodities Drop

By Candice Zachariahs

Aug. 13 (Bloomberg) -- Australia's dollar fell for a 12th day on speculation earnings from the nation's exports will drop as the prices of gold, crude oil and copper extended their slide.

The local dollar, known as the Aussie, traded near its weakest in 6 1/2 months after the UBS Bloomberg Constant Maturity Commodity Index of 26 commodities slid for the third day to its lowest since March. Exports of raw materials contribute about 17 percent to Australia's economy.

``Australia looks to be facing lower prices for the key commodities that it exports,'' said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. ``That means less demand for the Aussie dollar, which would temper the pace of improvement in Australia's trade position.''

Australia's dollar declined 0.3 percent to 87.13 U.S. cents at 9:17 a.m. in Sydney from 87.38 cents in late Asian trading yesterday when it touched 87.04, the lowest since Jan. 24. It dropped 1.1 percent to 95.19 yen, from 96.29 yesterday, reaching 95.01, the weakest level since April 17.

The Australian dollar fell against 15 of the 16 most-active currencies after crude oil prices slid to a 14-week low, gold fell for an eighth session and copper dropped to a six-month low in New York trading yesterday. Gold and crude oil are the nation's third and fourth most-valuable commodity exports.

The Westpac Commodity Futures Index, which tracks prices of the raw material Australia exports, has slumped 14 percent in the past month to the lowest since March.

Interest-Rate Bets

The Aussie has declined 7.5 percent since the beginning of the month as investors bet that the central bank will reduce borrowing costs from a 12-year high of 7.25 percent to boost a slowing economy.

Traders expect the bank to cut interest rates by about 1 percentage point over the next 12 months according to a Credit Suisse Group index based on overnight swaps trading. The RBA said Aug. 11 that a ``significant moderation'' in demand would slow inflation, making room for it to reduce rates.

Loses in the currency were limited before a government report that will probably show wages growth increased 1 percent in the second quarter, after unexpectedly slowing to 0.9 percent in the first three months of the year, according to the median estimate of 24 economists surveyed by Bloomberg News.

``We've seen clear dovish undertones from the RBA,'' Matthew Strauss, a senior currency strategist at RBC Capital Markets Inc. in Toronto, a unit of Canada's biggest bank by assets, said yesterday. ``The risk is that if the number comes in lower than expected, it would remove another hurdle for the RBA and increase chatter that the first cut may be a 50 basis point cut in September.''

Australian 10-year government bonds climbed for a fifth day, pushing the yield down 5 basis points, or 0.05 percentage point, to 5.82 percent. The last time the rate was at that level was in November. The price of the 5.25 percent bond maturing in March 2019 rose 0.342, or A$3.42 per A$1,000 face amount, to 95.509. Bond yields move inversely to prices.

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