Australian, New Zealand Dollars Drop as Regional Stocks Slide

By Candice Zachariahs

March 30 (Bloomberg) -- The Australian dollar dropped to the lowest in more than a week and New Zealand’s currency fell as regional stocks and commodities tumbled on concerns the global recession will deepen.

New Zealand’s currency pared its strongest month of gains since 1985 as factory output in Japan, the world’s second- largest economy, fell for a fifth month in February, its longest losing streak since 2001. The South Pacific nations’ dollars slid against Japan’s currency after an Obama administration official said bankruptcy may be the best option for troubled U.S. automakers, spurring investors to sell higher-yielding assets.

“The last two days of March are likely to be a bit of a whimper with the markets giving back some of this month’s gains,” said Alex Sinton, a senior currency dealer at ANZ National Bank Ltd. in Auckland. “The market is looking for signs of life in the economy.”

Australia’s currency fell 1.5 percent and touched 68.28 cents, the least since March 19, before trading at 68.36 U.S. cents as of 3:54 p.m. in Sydney. It pared its advance in March to 6.9 percent. The currency slipped 2.2 percent, the most since March 5, to 66.44 yen from 67.93 yen in New York March 27.

New Zealand’s dollar declined 1.3 percent to 56.31 U.S. cents from 57.06 cents in New York. It has strengthened 12 percent in March, the most since August 1985. It bought 54.72 yen, reducing this month’s advance to 12 percent, also the most since 1985. New Zealand’s dollar may slide toward 56.02 cents today, Sinton said.

Homes Sales, Futures Bets

New Zealand home-building approvals rose for the first time in three months in February. Approvals jumped 11.6 percent from January when they declined 13 percent to a record, Statistics New Zealand said in Wellington today, citing seasonally adjusted figures. Australian sales of newly built home gained 3.9 percent in February, the Housing Industry Association said today.

The Reserve Bank of Australia has room to cut interest rates further, Treasurer Wayne Swan said today in Tokyo. Borrowing costs are at a 45-year low after the bank trimmed rates 4 percentage points since early September. It is forecast to take its benchmark down a further 50 basis points to 2.75 percent when it meets April 7, according to the median estimate of 16 economists surveyed by Bloomberg News.

“Australia has certainly not dodged the effects of this global recession. But we are better placed than most other countries to deal with it,” Swan said.

Bets on Australia, New Zealand

Futures traders reversed bets that the Australian dollar will decline against the greenback, holding the largest net long position since August, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on an advance in the Australian dollar compared with those on a drop -- so-called net longs -- was 8,413 on March 24, compared with net shorts of 419 a week earlier.

Investors are the most bullish on Australian and New Zealand dollars since 2003 with Aberdeen Asset Management, Hermes Pension Management Ltd. and Kokusai Global Sovereign Open Fund betting that spending on commodities will increase as central banks print unprecedented amounts of cash to rescue their economies.

Investors should buy the Australian dollar against the euro as it may rise to the strongest since November, Barclays Capital said in a note to clients today. The currency, which traded at A$1.9354 per euro, should be bought on dips as it may rise as high as A$1.85 in three months, Barclays said.

Australia’s currency may erase this month’s losses versus New Zealand’s and rise as high as NZ$1.2931, Sue Trinh, senior currency strategist at RBC Capital Markets in Sydney wrote. It traded at NZ$1.2160 and has lost 4.7 percent in March.

Quarterly Declines

The so-called Aussie is set to fall 2.7 percent in the three months to March 31, its third straight decline after sliding 11 percent and 17 percent in the September and December quarters, respectively. New Zealand’s currency will weaken 2.9 percent, the smallest drop in four consecutive quarters of losses.

The currencies depreciated after their central banks slashed interest rates amid falling prices for commodities and equities as the industrialized world enters a synchronized recession. Benchmark interest rates are 3.25 percent in Australia and 3 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero percent in the U.S.

Retail sales in Australia last month shrank for the first time in five months, according to economists polled by Bloomberg News before a report scheduled for April 1.

Australian government bonds rose, ending the longest stretch of losses since February 2008. The yield on 10-year notes fell 10 basis points, or 0.10 percentage point, to 4.47 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 added 0.80, or A$8 per A$1,000 face amount, to 106.23.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 4.12 percent from 3.85 percent on March 27.

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