Australian, New Zealand Dollars Slump on Equities, Commodities

By Candice Zachariahs

Nov. 13 (Bloomberg) -- The Australian and New Zealand dollars dropped by the most in three weeks against the yen as U.S. equities and commodity prices slumped, prompting investors to dump high-yielding assets.

The currencies fell to two-week lows against the U.S. dollar as a gauge of risk aversion surged to the highest in two weeks. They also fell amid a second day of declines for commodities, which account for more than half of the two nations' exports.

``We've seen equity markets, commodities and emerging-market currencies selling off and a major unwinding in carry trades,'' said Matthew Strauss, a senior currency strategist at RBC Capital Markets Inc. in Toronto. ``Aussie and kiwi have been particularly hard hit because the unwinding of carry trades plus the commodity link is weighing on them,'' he said, referring to the currencies by their nicknames.

Australia's currency slid 2.9 percent to 63.75 U.S. cents as of 8:17 a.m. in Sydney from 65.66 cents late in Asia yesterday. It dropped as low as 63.51, the weakest since Oct. 29. The currency fell 5.3 percent, the most since Oct. 24, to 60.49 yen.

New Zealand's dollar weakened 2.6 percent to 55.93 U.S. cents from 57.40 in Asia yesterday. It touched 55.53 cents, also the lowest since Oct. 29. It bought 53.05 yen from 55.83.

The South Pacific nations' currencies plunged as U.S. stocks fell for a third day on concern the economic slump is deepening after Best Buy Co. warned of a ``seismic'' slowdown in spending.

The VIX volatility index, a Chicago Board Options Exchange gauge reflecting expectations for stock-market price changes and a measure of risk aversion, closed at a two-week high of 66.46.

The UBS Bloomberg Constant Maturity Commodity index of 26 raw materials has dropped in six of the past eight sessions on concern a slowing global economy will cut demand for raw materials, which account for about 60 percent of Australia's exports and 70 percent of New Zealand's.

New Zealand's manufacturing industry contracted for a sixth month in October, Business New Zealand Ltd., a Wellington-based employer group, said today in a statement e-mailed to Bloomberg.

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