Australian, N.Z. Dollars Near 3-Week Lows on U.S. Bank Concerns

By Patricia Lui and Garfield Reynolds

April 21 (Bloomberg) -- The Australian dollar traded near its lowest in almost three weeks and New Zealand’s was close to the weakest in a month as concern U.S. banking losses will deepen damped investors’ appetite for risk.

The currencies fell yesterday by the most in more than two months as Bank of America Corp. tumbled after increasing future loan loss provisions 57 percent to $13.4 billion. Australian policy makers cut borrowing costs two weeks ago because rising unemployment increased the likelihood inflation will slow, according to minutes of their April 7 meeting, released in Sydney today.

“The big concern is that the market got overly complacent on risk in recent weeks and we are now moving into a period where we are questioning this,” said Robert Rennie, chief currency strategist at Westpac Banking Corp. in Sydney. “The recent weeks are about as good as it gets between risk appetite and economic data sentiment.”

Australia’s dollar traded at 69.94 U.S. cents as of 11:44 a.m. in Sydney, from 69.66 cents yesterday in New York, when it touched the lowest since April 1. It was at 68.60 yen from 68.20 yen. New Zealand’s currency bought 55.22 U.S. cents from 55.25 cents yesterday, when it reached as low as 54.88 cents, the weakest since March 19. It bought 54.18 yen from 54.06 yen.

U.S. stocks tumbled yesterday after six straight weeks of gains as concern grew that credit losses are worsening while lower commodity prices dragged down energy and material prices, key exports of Australia and New Zealand.

U.S. Banks

Bank of America, the lender that lost three-quarters of its market value in the past year, plunged 24 percent as rising charge-offs for uncollectible loans overshadowed better-than- estimated earnings. Citigroup Inc. dropped 19 percent after Goldman Sachs Group Inc. said the bank’s credit losses are growing at a “rapid rate.” U.S. Steel Corp. and Exxon Mobil Corp. declined as oil and industrial metal prices decreased.

“A bit of reality seems to have sunk in overnight, following Bank of America’s earnings results,” wrote analysts led by Cameron Bagrie, chief economist at ANZ National Bank Ltd. in Wellington. “With investors rushing for the exit doors from risky assets, the U.S. dollar and the yen rose strongly.”

The Australian dollar will remain weak in coming sessions and investors should take the opportunity to “sell into strength” if the currency rebounds to 70.20 U.S. cents to 70.50 U.S. cents, Westpac’s Rennie said.

Growth Slowing

Australia’s economic growth is “slowing dramatically,” Treasurer Wayne Swan said in an interview on Australian Broadcasting Corp. radio today. “It’s inevitable there will be a period of negative growth. It’s also important that we underline the strengths in the Australian economy.”

“The effect of recent international and domestic information had been that the near-term outlook for demand and output in Australia was now weaker than expected,” Reserve Bank policy makers said, according to minutes of their April 7 meeting.

Prime Minister Kevin Rudd said yesterday for the first time that a recession in Australia is inevitable amid a slump in global growth that is eroding demand for natural resources from the world’s biggest shipper of coal and iron ore. Central bank Governor Glenn Stevens and his board cut the benchmark rate by a quarter-point to a 49-year low of 3 percent this month, the sixth reduction since September.

To contact the reporter on this story: Patricia Lui in Singapore at plui4@bloomberg.netGarfield Reynolds in Sydney at greynolds1@bloomberg.net