Australian Dollar Falls on Confidence Data; N.Z. Currency Gains

By Candice Zachariahs

Feb. 10 (Bloomberg) -- The Australian dollar fell from a one-month high against the U.S. currency after an industry report showed business confidence dropped to a record low last month. New Zealand’s dollar advanced.

The Australian currency also declined as Russian banks asked the government to moderate talks on $400 billion of credits to foreign lenders, signaling the global financial turmoil may be deepening. The Australian dollar ended three days of gains versus the greenback as a sentiment index for January fell to minus 32, the lowest since the series began in 1989, according to a survey by National Australia Bank Ltd.

“It certainly suggests that all is not well from a risk perspective and the Aussie dollar is leveraged to the global growth and risk cycle,” said Sue Trinh, a senior currency strategist at RBC Capital Markets in Sydney. “We’ve also seen pretty bad domestic data with the NAB business conditions and confidence survey showing record lows.”

Australia’s currency fell 0.4 percent to 66.95 U.S. cents as of 5:33 p.m. in Sydney from late in Asia yesterday. It earlier touched 68.49 cents, the highest level since Jan. 13. The currency slid 0.5 percent to 61.22 yen. It may find so- called support at 66.80 cents, Trinh said.

New Zealand’s dollar rose 0.4 percent to 53.43 U.S. cents, after rising as high as 54.47 cents, the strongest since Jan. 20. It bought 48.78 yen from 48.72.

The so-called kiwi may advance toward 55 U.S. cents over the next few days, said Khoon Goh, a senior economist at ANZ National Bank Ltd. in Wellington. “A lot of people were short the New Zealand dollar so we’ve seen a bit of a short-squeeze rally,” he said.

‘Backed Off’

The Australian dollar declined 38 percent against the yen and 25 percent versus the U.S. currency in the past six months as equities and commodities slumped. New Zealand’s currency sank 37 percent and 24 percent versus the yen and dollar during the same period.

“The Aussie has backed off pretty fast from 68.50 cents, so in our view that’s going to be a short-term peak,” said Craig Ferguson, a currency hedge fund manager at Antipodean Capital Management in Melbourne. “We’d expect a move toward 62.50 over the next couple of weeks as long as stocks continue to weaken.”

The so-called Aussie dollar will decline to about 50 to 55 U.S. cents and New Zealand’s will drop to 40 to 45 cents in the next year, Ferguson forecast

Benchmark interest rates of 3.25 percent in Australia and 3.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attract investors to the two South Pacific nations’ higher-yielding assets. The risk in these so-called carry trades is that currency market volatility may erase any profits.

Rescue Plan

Both currencies rose earlier on speculation financial sentiment will improve after U.S. Treasury Secretary Timothy Geithner announces a financial rescue plan in Washington today. President Barack Obama is demanding a stimulus bill on his desk before Congress leaves for the Presidents’ Day holiday Feb. 16.

Australian government bonds advanced for a second day. The yield on the benchmark 5 1/4 percent note due March 2019 fell two basis points to 4.34 percent, according to data compiled by Bloomberg. The price rose 0.185, or A$1.85 cents per A$1,000 face amount, to 107.389.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.48 percent from 3.49 yesterday.

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net.