Australia, New Zealand Dollars Drop on Commodities, U.S. Jobs

By Ron Harui

Jan. 8 (Bloomberg) -- The Australian and New Zealand currencies fell, snapping three days of gains versus the U.S. dollar, as prices of commodities that make up more than half the nations’ exports declined the most in three months.

The currencies also ended a five-day winning streak against the yen after a private report showed U.S. companies cut the most jobs in seven years last month, spurring investors to sell higher-yielding assets. Australia’s dollar extended losses versus the U.S. currency after home-building approvals dropped the most in six years in November, adding to signs of an economic slowdown.

“Risk appetite has deteriorated and equity markets obviously had a very poor session,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “This is weighing on the Australian and New Zealand dollars.”

Australia’s dollar fell to 70.75 U.S. cents at 11:52 a.m. in Sydney, from 72.07 cents late in Asia yesterday. It earlier reached a three-month high of 72.69 cents. The currency slid 2.3 percent, the most since Dec. 19, to 65.63 yen from 67.19 yesterday when it touched 68.26, the strongest since Nov. 11.

New Zealand’s dollar declined to 58.65 U.S. cents from 59.65 cents in Asia yesterday. It earlier reached 60.33 cents, the most since Dec. 18. The currency weakened to 54.44 yen from 55.61 yesterday when it touched 56.33, the highest since Nov. 14.

The number of permits granted to build or renovate houses and apartments fell 12.8 percent in November, the steepest drop since November 2002, following a revised 3.1 percent decline in October, the Bureau of Statistics said in Sydney. The median estimate in a Bloomberg News survey of economists was for a 1.5 percent loss.

Companies in the U.S. eliminated 693,000 jobs in December, the most since records began in 2001, ADP Employer Services said yesterday. The median forecast in Bloomberg survey of 24 economists was for a reduction of 495,000.

‘Risk Aversion’

The MSCI Asia-Pacific Index of regional equities weakened 1.8 percent after the Standard & Poor’s 500 Index of U.S. equities fell 3 percent yesterday, trimming this year’s advance to less than 0.4 percent.

“The U.S. jobs report and sharp falls in equities are causing risk aversion to rear its head,” said Besa Deda, chief economist at St. George Bank Ltd. in Sydney. “Risk aversion generally hampers demand for the Australian dollar,” she said.

The Reuters/Jeffries CRB Index of 19 raw materials fell 4.7 percent to 231.49 yesterday, the largest loss since Oct. 10. The Bloomberg UBS Constant Maturity Commodity Index of 26 components slipped 4.2 percent to 905.91, the biggest decline since Dec. 5.

Benchmark interest rates are 4.25 percent in Australia and 5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors through so-called carry trades.

In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the two. The risk is that currency market moves erase those profits.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net