By Candice Zachariahs
March 31 (Bloomberg) -- The Australian dollar headed for a third quarterly loss and New Zealand’s for a fourth as concern the global recession is deepening damped demand for higher- yielding assets.
The two currencies were set for the longest run of quarterly losses since 2006 as Australia’s central bank said for the first time today the economy is likely to slide into a recession this year and a report showed New Zealand’s business confidence was the second-worst on record. The currencies gained today as local stocks performed better than U.S. equities yesterday, encouraging some investors.
“Europe will be a continued focus with worries about their fiscal, economic and banking problems and there appears to be a clear end-game for the U.S. auto sector with a much greater chance of them moving into Chapter 11,” said Tony Morriss, a senior markets strategist at Australia & New Zealand Banking Group Ltd. in Sydney. “People are taking risk off the table.”
Australia’s currency traded at 68.73 U.S. cents as of 6:40 p.m. in Sydney from 68.14 cents in New York yesterday and 70.26 cents at the end of last year. New Zealand’s dollar bought 56.82 cents from 56.34 cents yesterday and 57.92 cents on Dec. 31.
Australia’s gross domestic product is “likely to fall in 2009,” deputy central bank governor Ric Battellino said today in Brisbane. Still, “Australia will remain one of the better- performing economies in the developed world,” he said.
Rate Bets
Traders reduced bets to 15 percent the Reserve Bank of Australia will cut its benchmark interest rate by half a percentage point to 2.75 percent at its next meeting on April 7 from 33 percent odds yesterday, according to a Credit Suisse index based on swaps.
“The market is reassessing the severity of an RBA cut, if any, next month,” said Tim Waterer, a foreign-exchange dealer with CMC Markets in Sydney.
Australian bank lending growth unexpectedly stalled in February with total loans provided by banks and other finance companies remaining unchanged from January, the RBA said today. The median forecast of economists surveyed by Bloomberg News was for a 0.5 percent gain.
A net 21.2 percent of New Zealand’s companies surveyed this month expect sales and profits will decline over the next 12 months, according to a report released by ANZ National Bank Ltd. A December reading of 21.5 was the most pessimistic since the survey began in 1988.
Daily Gain
The currencies gained today as Australia’s S&P/ASX 200 Index declined 0.6 percent compared with the 3.3 percent slump in the Dow Jones Industrial Average yesterday.
“The Australian stock market is holding up better than expected in the wake of that 250-point fall in the Dow and that put the local currency in good stead,” CMC’s Waterer said.
The Australian and New Zealand currencies are poised to register their first quarterly gain against the yen since June, rising 6 percent and 6.3 percent respectively.
Australia’s dollar advanced 1.8 percent today to 67.47 yen and New Zealand’s currency climbed 1.8 percent to 55.81 yen.
Higher interest rates in Australia and New Zealand compared with 0.1 percent in Japan and as low as zero in the U.S. attract investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits. New Zealand’s benchmark rate is 3 percent.
Monthly Gain
The currencies rose in March against the dollar and yen as global stocks headed for their best month since 2003. New Zealand’s dollar has strengthened 14 percent against the greenback and Australia’s currency has risen 7.6 percent.
Australian government bonds rose for a second day. The yield on the benchmark 10-year note fell four basis points, or 0.04 percentage point, to 4.42 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 added 0.31, or A$3.10 per A$1,000 face amount, to 106.59.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.95 percent from 4.04 yesterday.
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net.
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