By Garfield Reynolds
Jan. 9 (Bloomberg) -- The Australian and New Zealand dollars rose as the number of Americans collecting unemployment benefits surged to a 26-year high, helping weaken the U.S. currency.
The currencies also gained as President-elect Barack Obama warned the U.S. risks sinking deeper into an economic crisis without a stimulus package of about $775 billion. The Dollar Index on ICE futures, which tracks the greenback versus six major currencies including the euro and yen, dropped for a second day.
“The Australian dollar is holding onto its gains because of the broader sell-off in the U.S. dollar,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Sydney. “Longer-term there are some very dark clouds on the horizon for the world economy. Global trade is really collapsing, so I would expect to see further weakness in the Australian dollar.”
Australia’s dollar rose 1.2 percent to 70.96 U.S. cents at 11:39 a.m. in Sydney, from 70.14 cents in late Asian trading yesterday. The currency strengthened 1 percent to 64.88 yen from 64.27.
New Zealand’s dollar advanced 0.7 percent to 59.29 U.S. cents from 58.85 cents in Asia yesterday. It traded at 54.19 yen from 53.90 yen yesterday.
The Australian currency may trade between 70 and 72 U.S. cents today and is more likely to move toward the bottom of that range, Cavenagh said. It may break below 70 cents in the next two weeks. New Zealand’s dollar probably will trade between 58 and 60 U.S. cents in coming weeks, he said.
Commodities, Rates
Investors should sell Australia’s dollar as prices of commodities that the nation exports may extend losses and the central bank is likely to lower interest rates, according to Australia & New Zealand Banking Group Ltd.
The currency’s two-week rally makes an “ideal time” for Australian dollar sellers to put some hedges in place, analysts led by Amy Auster, Melbourne-based head of foreign exchange and international economics research at ANZ, wrote in a research note yesterday.
“ANZ projects further falls in commodity prices,” Auster and Amber Rabinov, an economist, wrote in the note. “The Australian dollar’s yield advantage should decline as the Reserve Bank of Australia continues to cut interest rates.”
Australia’s fourth-largest bank predicts the local dollar will fall to 63 cents by the end of March and will weaken further to 54 cents by year-end, according to the note. The median forecasts of 38 analysts surveyed by Bloomberg News are for 62 cents and 67 cents, respectively.
The benchmark interest rate in Australia is 4.25 percent, compared with 0.1 percent in Japan and as low as zero in the U.S., making the South Pacific nation an attractive destination for international investors seeking higher returns.
Greenback Declines
The U.S. dollar traded at 91.44 yen, after falling 1.6 percent yesterday and touching 90.85, the lowest since Jan. 2. The greenback was at $1.3672 per euro. It dropped 0.4 percent yesterday after the Labor Department said the total number of people getting benefits increased in the week ended Dec. 27 to 4.6 million.
Economists estimate a Labor Department report today will show the world’s largest economy lost jobs every month in 2008 and the unemployment rate rose in December to a 16-year high, according to a Bloomberg News survey.
To contact the reporter on this story: Garfield Reynolds in Sydney at greynolds1@bloomberg.net
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