By Candice Zachariahs
April 28 (Bloomberg) -- The Australian and New Zealand dollars fell for a second day on speculation the spread of swine flu from Mexico will hurt tourism and deepen the global recession, spurring investors to sell riskier assets.
Demand for the currencies weakened after the World Health Organization raised its pandemic alert to an unprecedented level as the U.S. confirmed 40 cases of the flu and Mexico’s death toll reached 149. New Zealand Health Minister Tony Ryall said officials are monitoring 56 people displaying symptoms indicating the possibility of swine flu after visiting Mexico or the U.S. in the past two weeks.
“The swine flu concerns are going to provide problems for countries like New Zealand and Australia that rely on tourism,” said Alex Sinton, a senior currency dealer at ANZ National Bank Ltd. in Auckland.
Australia’s currency slid 0.6 percent to 70.60 U.S. cents as of 11:27 a.m. in Sydney from 71 cents in New York yesterday. The currency fell 0.9 percent to 68.09 yen. New Zealand’s dollar dropped 1.1 percent to 55.96 U.S. cents from 56.57 cents in New York. It bought 54.01 yen from 54.74 yen.
Australia’s dollar may slide toward 69.60 U.S. cents today with New Zealand’s currency declining to 55.87 cents, Sinton said.
Reserve Bank
New Zealand’s currency also fell on speculation the nation’s central bank will cut interest rates at a policy meeting this week. Traders are betting on a 40 percent chance of a 50 basis point cut on April 30, a Credit Suisse index based on swaps trading shows. A basis point is 0.01 percentage point.
Key rates are 3 percent in Australia and New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ assets.
“What will be important is how the bank talks about the long-end of the curve,” Sinton said. “They are likely to make comments about keeping rates lower for longer.”
New Zealand’s dollar has lost 29 percent of its value against the greenback over the past 12 months, the worst performance among major currencies, as central bank Governor Alan Bollard cut rates six consecutive times.
‘Bearish’ Setup
The so-called Aussie also declined after Treasurer Wayne Swan told Australian Broadcasting Corp. radio that the economy would grow slowly for some time and the global recession will have a “brutal impact” on government revenues.
Gains in the Australian dollar have been limited by sellers at the 200-day moving average of 72.22 cents, New York-based Tom Fitzpatrick and London-based Shyam Devani, technical analysts at Citigroup, wrote in a research note yesterday. “The setup is bearish,” and Australia’s currency may reach 68.50 cents in the days ahead, they wrote.
Australian government bonds advanced for a second day. The yield on 10-year notes fell four basis points to 4.43 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 gained 0.34, or A$3.40 per A$1,000 face amount, to 106.54.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 3.64 percent from 3.62 yesterday.
To contact the reporter on this story: Candice Zachariahs in Mumbai at czachariahs2@bloomberg.net
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