Australian, New Zealand Dollars Decline as U.S. Stocks Slide

By Candice Zachariahs

Nov. 4 (Bloomberg) -- The Australian and New Zealand dollars fell as U.S. stocks declined, reducing investor appetite for higher-yielding assets.

Australia's currency also retreated amid speculation the Reserve Bank of Australia will today reduce borrowing costs for the third straight month. The RBA will cut interest rates 0.5 percentage point to 5.5 percent, according to 15 of 16 economists surveyed by Bloomberg News.

``For the Aussie to continue to recover the ground that was lost, particularly in the last couple of weeks, we would need to see stocks trading higher,'' said Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp. ``For the next couple of sessions the Aussie will trade in a 67 to 70 U.S. cent range,'' he said, referring to the currency by its nickname.

Australia's currency fell 0.6 percent to 67.63 U.S. cents as of 9:06 a.m. in Sydney from 68.06 cents late in Asia yesterday. The currency was 0.8 percent lower at 67.05 yen. The Australian dollar has dropped 13 percent in the past month against the greenback and 18 percent versus the yen.

New Zealand's dollar declined 0.1 percent to 59.19 U.S. cents from 59.23 cents in Asia yesterday. It bought 58.67 yen from 58.81.

The Australian dollar declined as stocks in the U.S. fell on the worst contraction in manufacturing since 1982 and forecasts that the sagging economy will reduce profits. About 1 billion shares changed hands on the floor of the New York Stock Exchange, the slowest trading day since August. The S&P 500 lost 2.45 points, or 0.3 percent, to 966.3.

``At present, everyone seems in a holding pattern with equities moving sideways,'' said Cameron Bagrie, chief economist at ANZ National Bank Ltd. in Wellington. ``If you're looking 12- 13 months out, the kiwi dollar is going to be weaker,'' he said, referring to the currency by its nickname.

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