By Ron Harui and Tracy Withers
Jan. 15 (Bloomberg) -- New Zealand’s dollar fell to its lowest since 2001 and Australia’s dollar dropped to the weakest in a month against the yen on concern the global slowdown will worsen, reducing demand for higher-yielding assets.
New Zealand’s currency slipped to the lowest in more than a month versus the U.S. dollar after house prices declined by the most in three years last month, adding to signs the nation’s recession is deepening. Australia’s currency slid to a four-week low and the nation’s 10-year bond yield fell to levels unseen since 1969 after a government report showed 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 percent to 47.75 yen as of 3:05 p.m. in Wellington from 49.23 yen late in Asia yesterday. It reached 47.70 yen, the lowest since September 2001. The currency also dropped 2.5 percent to 53.64 U.S. cents. It touched 53.50 cents, the weakest since Dec. 8.
Australia’s dollar declined 2.7 percent to 58.72 yen from 60.36 yen in Asia yesterday. It reached 58.51 yen, the lowest since Dec. 12. The currency also fell 2.2 percent to 65.95 U.S. cents from 67.43 cents. It touched 65.63 cents, the weakest in more than four weeks.
New Zealand’s house prices fell 7.4 percent in December from a year earlier, the biggest since the series began in 2005, Quotable Value New Zealand Ltd., the Wellington-based 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.
‘Negative Reaction’
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.
“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 3.3 percent today after the Standard & Poor’s 500 Index declined 3.4 percent yesterday.
‘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 that 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.
Australian 10-year bonds rose, with the yield falling 13 basis points to 3.86 percent, the lowest since at least 1969. Two-year yields dropped to 2.47 percent, the lowest since 1983.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, declined to 3.74 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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