Australian Dollar Falls as Commodities Slide; N.Z. Dollar Drops

By Ron Harui

Aug. 7 (Bloomberg) -- The Australian dollar fell to the lowest in more than four months as prices slid for commodities the nation exports. The New Zealand dollar traded near the weakest in 10 months.

Australia's dollar declined for an eighth day, the longest stretch since January 1995, on speculation the central bank will cut interest rates this year. The currency pared losses after a government report showed employers hired double the number of workers in July than forecast by economists in a Bloomberg News survey. New Zealand's dollar dropped as the jobless rate rose to the highest in more than two years.

``In terms of RBA policy, the implications are that we are still looking at an easing cycle beginning sooner rather than later,'' said Sue Trinh, a senior currency strategist at RBC Capital Markets in Sydney. ``I'd say the Aussie's rally will likely fade. I would say most people will relegate this piece of data as a lagging indicator.''

Australia's dollar fell 0.4 percent to 91.22 U.S. cents at 5:09 p.m. in Sydney, from 91.55 cents late in Asia yesterday. It was at 90.88 immediately before Australia's employment report and reached 90.65, the weakest since April 2. The currency bought 99.85 yen from 99.44 yen.

New Zealand's dollar declined 0.7 percent to 71.80 cents from 72.28 cents late in Asia yesterday. It reached 71.65, the lowest since Sept. 19. The currency bought 78.57 yen from 78.51.

The number of people employed in Australia rose 10,900 last month, the statistics bureau said in Sydney today, following a revised 22,200 gain in June. The median estimate of 24 economists surveyed was for a 5,000 increase.

Australian Bonds Gain

Australian two-year government bonds gained for a 12th day, pushing the yield down 3 basis points, or 0.03 percentage point, to 5.96 percent, near the lowest since March 15, 2007. The yield has dropped 70 basis points since July 22. The price of the 5.25 percent security due August 2010 rose 0.058, or A$0.58 per A$1,000 face amount, to 98.678.

``The bond market's not reacted much at all'' to Australia's jobs data, said Andrew Kennedy, a bond trader at ABN Amro Holding NV in Sydney. ``The near-term direction is going to be choppy after we've had such a big move.''

RBA Governor Glenn Stevens on Aug. 5 kept borrowing costs on hold at 7.25 percent, saying there was increasing ``scope to move toward a less restrictive stance of monetary policy'' as the economy slowed.

The central bank will cut its benchmark rate by 0.89 percentage point over the next 12 months, according to a Credit Suisse Group index based on overnight swaps trading. The bank will lower rates by 0.25 percentage point at its September meeting another Credit Suisse index showed. The RBA usually adjusts the target rate in 0.25 percentage-point increments.

New Zealand's Dollar

Australia's dollar fell against 12 of the 16 most-traded currencies as the Reuters/Jeffries CRB Index of 19 commodities and the UBS Constant Maturity Index of 26 raw materials slid for a fifth day yesterday in New York.

Crude oil futures fell as low as $117.11 a barrel, 20 percent below the July 11 record of $147.27 in New York. Crude oil is Australia's fourth most-valuable raw material export. Commodity shipments contribute 17 percent to the nation's economy.

The New Zealand dollar traded near a 10-month low after a government report showed the jobless rate rose to the highest in more than two years, boosting prospects for further central bank interest-rate reductions.

The currency weakened for a third day as traders bet the employment data will strengthen the case for the Reserve Bank of New Zealand to cut borrowing costs. Central bank Governor Alan Bollard said Aug. 5 that a slowing economy would justify further reductions to the nation's benchmark rate of 8 percent.

`Unlikely to Alter'

``The result is unlikely to alter the need to cut rates further at the September RBNZ meeting,'' wrote Joshua Williamson, a senior strategist at TD Securities in Sydney, in a research note today.

The unemployment rate rose to 3.9 percent in the second quarter from a revised 3.7 percent in the previous three months, Statistics New Zealand said in Wellington today. The median estimate of 13 economists surveyed by Bloomberg was for 3.8 percent.

The Reserve Bank of New Zealand will lower interest rates 1.51 percentage points over the next 12 months, according to Credit Suisse indexes, which show the bank will reduce rates by 0.25 percentage point at its September meeting.

New Zealand's government bonds were little changed. The yield on the benchmark 10-year note held at 6.17 percent, while the yield on the three-year security rose 1 basis point to 6.18 percent. Yields move inversely to prices.

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