Australia, N.Z. Dollars Fall as China, Europe Economies Slowing

By Garfield Reynolds

April 17 (Bloomberg) -- The Australian and New Zealand dollars weakened after European industrial output dropped by the most on record and China’s economy grew at the slowest pace since 1999, bolstering concern the global slump may deepen.

The currencies headed for their biggest declines in at least two months against the yen as U.S. housing starts fell more than economists expected and a record number of people collected U.S. jobless benefits, reducing appetite for higher- yielding assets.

“The latest release questions the belief that a strong bottom is forming in the U.S. housing sector, leave alone expectations of a recovery in the near future,” Matthew Strauss, senior currency strategist in Toronto at RBC Capital Markets, wrote in a research note yesterday. The Australian and New Zealand dollars “underperformed during the last 24 hours after disappointing Chinese GDP data.”

Australia’s dollar weakened to 72 U.S. cents as of 8:14 a.m. in Sydney from 72.06 cents yesterday. It was at 71.55 yen from 71.54 yen yesterday, set for a 0.8 percent decline since late on April 10. New Zealand’s currency fell to 57.25 U.S. cents from 57.27 cents. It bought 56.89 yen from 56.84 yen yesterday and 58.44 last week.

The “severe” global recession will last throughout 2009, Pacific Investment Management Co. said in a report on the outlook for markets in the second quarter. Newport Beach, California-based Pimco is manager of the world’s biggest bond fund.

The number of people collecting U.S. benefits jumped to a record 6.02 million in the week to April 5, according to a Labor Department report yesterday.

Total U.S. housing starts fell 11 percent to a 510,000 annual rate, lower than estimated by economists surveyed. The drop was led by a 29 percent plunge in work on multifamily homes, such as townhouses and apartment buildings, which dropped to an annual rate of 152,000 after surging 62 percent in February.

To contact the reporter on this story: Garfield Reynolds in Sydney at greynolds1@bloomberg.net