Australian Dollar Falls Below 80 U.S. Cents as Commodities Slip

By Candice Zachariahs

Sept. 10 (Bloomberg) -- The Australian dollar dropped below 80 U.S. cents for the first time since August 2007 as prices tumbled for commodities the nation exports, including gold.

The currency, a favorite of so-called carry trades, also declined to its weakest in more than two years against the yen after U.S. equity markets slid amid growing concern about Lehman Brothers Holdings Inc.'s ability to raise capital.

``The atmosphere is extremely negative for anything leveraged to global growth, which is Australia and particularly the Australian dollar,'' said Peter Jolly, head of research at National Australia Bank Ltd. in Sydney. ``We've seen sizable falls in equities and commodities overnight and that's dragged the Australian dollar lower.''

The currency fell 1.2 percent to 80.39 U.S. cents at 8:39 a.m. in Sydney from 81.39 cents in late Asian trading yesterday. It earlier touched 79.83, the lowest since August 2007. The Australian dollar bought 86.07 yen from 87.97 yen yesterday.

Jolly forecast that the Aussie, as the currency is also called, will trade between 70 and 80 cents for the next six months.

The Australian dollar was the worst performer among the 16 most-active currencies traded against the greenback after the price of gold, the country's third-most valuable raw material export, fell for a seventh straight session. Crude oil, the nation's fourth-most valuable commodity export, slipped to a five-month low.

The Aussie also fell as the Standard & Poor's 500 Index of U.S. stocks slumped 3.4 percent, its biggest drop since February 2007. Lehman, the fourth-largest U.S. securities firm, led financial shares lower and the drop in oil prices pushed energy companies down by the most in six years.

In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates. The risk is that currency market moves erase those profits. Borrowing costs stand at 7 percent in Australia, compared with 0.5 percent in Japan and 2 percent in U.S.

To contact the reporter on this story: Candice Zachariahs in Sydney at Czachariahs2@bloomberg.net