Australian, New Zealand Dollars Fall Amid Growth, Rates Concern

By Candice Zachariahs

Oct. 1 (Bloomberg) -- The Australian and New Zealand dollars fell to the lowest in more than a week on speculation their central banks will cut interest rates to combat slowing growth and declining prices for commodities the nations export.

The currencies also fell as the U.S. dollar rose on speculation the U.S. Senate will salvage a $700 billion bank- bailout plan. Gold, Australia's third most-valuable raw material export, slid in New York trading.

``U.S. dollar strength across the board last night saw the Aussie and Kiwi lower,'' said Richard Grace, chief currency strategist at Commonwealth Bank of Australia in Sydney. ``In the medium-term, the trend is still to the downside with the U.S. dollar likely to strengthen, global growth concerns taking commodity prices lower and both central banks cutting rates.''


The Australian dollar fell 1.4 percent to 79.49 U.S. cents at 7:40 a.m. in Sydney, from 80.62 cents late in Asia yesterday. It earlier touched 78.68 cents, the weakest since Sept. 18. It declined 0.5 percent to 84.28 yen.

New Zealand's dollar slid to 66.42 U.S. cents, the lowest since Sept. 18, before trading at 67.12 U.S. cents from 67.59 cents late in Asia yesterday. It rose 0.2 percent to 71.20 yen.

U.S. Bailout

The currencies fell after reports the U.S. Senate will try to revive a $700 billion rescue plan for the financial sector. The bill would have allowed the government to buy troubled assets from banks.

``The high-yielding commodity currencies continue to trade heavy as the markets focus on events in the U.S.,'' wrote Nick Jonas, a Brisbane-based treasury analyst at Suncorp-Metway Ltd., in a research note today.

The Reserve Bank of New Zealand is certain to cut interest rates by 0.5 percentage point on Oct. 23, according to a Credit Suisse Group index based on interest-rate swaps. Australia's central bank is a certainty to trim borrowing costs by at least 0.25 percentage point and an 89 percent chance to make a cut twice as large as that, according to a separate Credit Suisse index.

Benchmark interest rates are 7 percent in Australia and 7.5 percent in New Zealand, compared with 0.5 percent in Japan and 2 percent in the U.S., luring investors to the South Pacific nations' assets. The risk in such trades is that currency market moves will erase profits.

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net