By Candice Zachariahs
Nov. 18 (Bloomberg) -- The Australian dollar extended declines after the central bank said its recent interventions to buy the currency were not ``designed to defend any particular level,'' and it saw benefit in moving quickly to a ``neutral position'' in the minutes of its November policy meeting.
Australia's currency weakened to a low of 64.32 U.S. cents before trading at 64.43 cents as of 12:11 p.m. in Sydney, from 64.82 cents before the minutes were released and 65.24 cents late in Asian trading yesterday. The currency fell as low as 61.99 yen, before trading at 62.19 from 62.57 yen yesterday.
``We saw initial weakness on comments that the foreign- exchange intervention they've done is not designed to defend any particular level,'' said John Horner, a currency strategist at Deutsche Bank AG in Sydney. The minutes ``suggest that maybe the pace of rate cuts will slow in the coming months.''
The Australian dollar has fallen 25 percent since September when the Reserve Bank of Australia made the first of its cuts, slashing interest rates two percentage points to 5.25 percent in its steepest reduction since 1991. The dollar will weaken further over ``the next few weeks and go into the high 50s by the year-end,'' said Horner.
New Zealand's currency was 1.5 percent lower at 55.15 U.S. cents from 55.98 cents in Asia yesterday. It bought 53.24 yen from 54.07.
Stocks Slide
The Australian and New Zealand dollars fell earlier in the day as equities slid on concern the global recession will deepen. U.S. stocks tumbled, extending a two-week drop, after official figures showed a record contraction in New York manufacturing and Citigroup Inc. announced plans to cut 52,000 jobs.
Australia's S&P ASX 200 Index declined 1.1 percent and Macquarie Group Ltd., the nation's biggest securities firm, posted a 43 percent drop in first-half profit after writing down the value of assets.
``Equities are going to retain a pretty important influence over currencies,'' said Joe Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia Ltd.
New Zealand's dollar may weaken further before an announcement on Nov. 21 by Fonterra Cooperative Group Ltd., the world's biggest exporter of dairy products, on milk payments to farmers. Global dairy prices have plunged this year as the U.S. and Australia increased production and last year's record prices lowered demand.
``New Zealand is the largest exporter of dairy in the world,'' said Tony Allen, head of currency trading at ANZ National Bank Ltd. in Wellington. ``Our current account deteriorates quickly with our dairy payouts deteriorating. That's going to keep the currency under pressure.''
Australian government bonds were little changed, with the yield on the benchmark 10-year note at 4.973 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 fell 0.063, or A$0.63 per A$1,000 face amount, to 102.206.
New Zealand's two-year swap rate, a fixed payment made to receive floating rates, declined to 5.44 percent from 5.48 yesterday.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
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