By Candice Zachariahs
Dec. 5 (Bloomberg) -- The Australian and New Zealand dollars headed for a weekly decline as investors sold higher- yielding assets before a report forecast to show unemployment in the U.S. rose to the highest since 1993.
Demand for the currencies weakened as policy makers in Australia, New Zealand, Europe and the U.K. lowered their benchmark rates amid increasing signs of a global slowdown. Merrill Lynch & Co. forecast yesterday that crude oil may plunge more than 40 percent to $25 a barrel should the economic contraction spread to China, Australia’s biggest trading partner.
“There is no shortage of ammunition for an extended recession, the balance is overwhelmingly on that side of the equation,” said Alex Sinton, a senior currency dealer at ANZ National Bank Ltd. in Auckland. The Australian and New Zealand dollars are “still under pressure” and could slump toward 63.50 and 52.50 U.S. cents respectively today, he said.
Australia’s currency fell 1.8 percent to 64.36 U.S. cents as of 10:56 a.m. in Sydney from 65.54 in New York late last week. The currency dropped 4.9 percent to 59.53 yen from 62.56.
New Zealand’s dollar slid 3 percent to 53.25 U.S. cents from 54.89 cents in New York late last week. It declined 6 percent to 49.23 yen from 52.37 and earlier touched 48.68 yen, the weakest since October 2001.
U.S. payrolls shrank by 333,000 workers in November after a drop of 240,000 in the previous month, according to the median forecast of 73 economists surveyed by Bloomberg News. The jobless rate may have jumped to 6.8 percent, the highest level in 15 years, according to the median forecast. The report from the Labor Department is due later today.
Testing Times
The report “will provide a real test of the Australian dollar’s resilience to bad news on the global economy,” wrote Sydney-based John Kyriakopoulos, head of currency strategy at National Australia Bank Ltd. in Sydney. The currency will struggle above 66 cents in the near-term in an environment of low risk and low commodity prices, he wrote.
The Reserve Bank of Australia lowered interest rates 1 percentage point to a six-year low of 4.25 percent this week as a report showed the nation’s economy grew 0.1 percent in the third quarter, the weakest pace in eight years.
Governor Alan Bollard slashed New Zealand’s official rate by a record 1.5 percentage points to 5 percent yesterday saying “the balance of risks to activity and inflation are to the downside.”
Economic growth in New Zealand’s major trading partners will be the weakest in more than 20 years in 2009, wrote Joseph Capurso and Richard Grace, Sydney-based currency strategists at Commonwealth Bank of Australia.
Carry Trade
Higher interest rates, compared with 0.3 percent in Japan and 1 percent in the U.S., had attracted investors to assets of countries including Australia and New Zealand. The risk in such trades is that currency market moves will erase profits.
Australian government bonds declined. The yield on the 10- year note rose 2 basis points, or 0.02 percentage point, to 4.27 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 slipped 0.153, or A$1.53 per A$1,000 face amount, at 108.042.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 4.78 percent from 4.86 yesterday.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net
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