By Ron Harui and Tracy Withers
Jan. 15 (Bloomberg) -- New Zealand’s dollar fell to the lowest since 2001 against the yen and Australia’s dollar dropped to the weakest in a month on concern the global slowdown will worsen. Australian bonds gained.
New Zealand’s currency slipped to the lowest in more than a month versus the U.S. dollar after a government report showed house prices declined the most in three years last month, adding to signs the nation’s recession is deepening. Australia’s 10- year yield fell to the lowest since at least 1969 after the statistics bureau said the unemployment rate rose to the highest level in almost two years.
“Investors are risk averse, given ongoing worries over a worldwide recession,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “The Japanese are pulling money out of higher-yielding currencies such as the Australian and New Zealand dollars.”
New Zealand’s dollar fell 3.1 percent to 47.71 yen as of 7:01 p.m. in Wellington from late in Asia yesterday. It reached 47.40 yen, the lowest since September 2001. The currency dropped 2.5 percent to 53.61 U.S. cents. It touched 53.36 cents, the weakest since Dec. 8.
Australia’s dollar declined 2.8 percent to 58.66 yen after touching 58.28 yen, the lowest since Dec. 12. The currency fell 2.2 percent to 65.93 U.S. cents. Against New Zealand’s dollar, Australia’s currency climbed 0.3 percent to NZ$1.2302. It reached NZ$1.2352, the highest since Sept. 15.
‘Lot of Trouble’
New Zealand’s house prices fell 7.4 percent in December from a year earlier, the biggest drop since the series began in 2005, Quotable Value New Zealand Ltd., a government valuation agency said in an e-mailed report today. A separate report showed house sales dropped 23 percent in December from a year earlier and it took longer to sell a property.
The New Zealand dollar declined to a four-month low versus the Australian dollar after New Zealand Prime Minister John Key said today the economy may not grow this year and the jobless rate may reach 7 percent.
“The kiwi is in a lot of trouble,” said Matthew Kassel, director of proprietary trading at ING Financial Markets LLC in New York, in an interview with Bloomberg Television. “There’s upside to Aussie-kiwi as a cross,” he said, referring to the two currencies by their nicknames.
The number of Australians employed dropped by 1,200, the statistics bureau said in Sydney today. Full-time employment plunged by 43,900. The median estimate of economists surveyed by Bloomberg News was for a decline of 20,000 jobs. The jobless rate rose to 4.5 percent from 4.4 percent.
‘Negative Reaction’
“The big fall in full-time jobs suggests that these numbers are going to capture some retrenchment in the economy,” said Tony Morriss, a senior currency strategist at Australia & New Zealand Banking Group Ltd. in Sydney. “These figures are seen as slightly soft, and there’s a muted negative reaction from the Aussie dollar.”
As the global economy slows, investors turned to the yen, which climbed this year against all 16 most-active currencies, including New Zealand’s and Australia’s. Benchmark interest rates are 5 percent in New Zealand and 4.25 percent in Australia, compared with 0.1 percent in Japan and as low as zero in the U.S.
Asian stocks declined, prompting investors to pare so- called carry trades. The MSCI Asia-Pacific Index of regional shares fell 4.2 percent, its fifth decline in six days.
‘Escalating Fears’
“Escalating fears about the global outlook and weak equities dominated currency markets,” said Danica Hampton, strategist at Bank of New Zealand Ltd. in Wellington. “The deteriorating global backdrop encouraged investors to ditch growth-sensitive currencies like the New Zealand dollar in favor of the relative safety of U.S. dollar and yen.”
In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates. The risk is currency market moves erase those profits.
Financing costs in Australia rose. The difference between the rate Australian banks charge each other for three-month loans and the overnight swap rate climbed to 67.3 basis points from 60.6 basis points yesterday. The gauge, a measure of cash scarcity, averaged 11 basis points in the five years before the credit crunch started in August 2007.
The yield on the Australian government’s benchmark 10-year bond fell 15 basis points to 3.84 percent, the lowest since at least 1969. Two-year yields dropped as low as 2.47 percent, the least since 1983.
“There’s a lot of risk aversion,” said Besa Deda, chief economist at St. George Bank Ltd. in Sydney. “It’s helping bonds to be well bid.”
The 10-year yield may decline to 3.60 percent in the “near term,” Deda said.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, declined to 3.73 percent from 3.81 percent late in Asia yesterday.
To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Tracy Withers in Wellington at twithers@bloomberg.net.
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