N.Z. Dollar Slumps to 6 1/2-Year Low; Australia Dollar Declines

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New Zealand’s dollar fell to a 6 1/2-year low and Australia’s currency extended three weeks of declines after U.S. and Asian shares slumped, prompting investors to seek the safety of the greenback.

Australia’s dollar also fell after three of the nation’s four biggest banks had their ratings outlook cut to negative by Moody’s Investors Service as the economy slows and bad debts grew. Australian Treasurer Wayne Swan said today the economy will feel the effects of a “dramatic” global slowdown that pushed seven of the nation’s 10 biggest trading partners into recession. New Zealand Prime Minister John Key said his nation’s recession will run for some time.

“Both the Aussie and kiwi have come under a significant degree of pressure in a firm-dollar environment,” said Mitul Kotecha, Hong Kong-based head of global foreign-exchange strategy at Calyon, the investment-banking unit of French bank Credit Agricole SA. “We’re going to continue to see a soft tone but the downside should be limited from here,” he said, referring to the currencies by their nicknames.

New Zealand’s dollar dropped as low as 49.12 U.S. cents, the weakest level since November 2002, before trading at 49.39 cents as of 4:36 p.m. in Sydney from 50.08 cents in New York last week. It fell to 48.10 yen from 48.90.

Australia’s currency declined to 63.35 U.S. cents from 63.88 cents late last week after touching 62.98, the weakest since Feb. 3. The currency slipped 1 percent to 61.69 yen.

Demand for the Australian and New Zealand dollars is likely to resurface should the currencies fall to 62.75 cents and 49.20 cents, respectively, Kotecha said.

From Bloomberg News.