By Candice Zachariahs Oct. 21 (Bloomberg) -- The Australian dollar fell after the central bank said risks to the economy had made a ``strong economic case'' for its 1 percentage point rate cut on Oct. 7. The New Zealand dollar also declined. The Australian dollar fell 0.7 percent to 69.53 U.S. cents as of 4:17 p.m. in Sydney, erasing earlier gains after the RBA minutes were published today. New Zealand's dollar declined 0.1 percent to 61.65 cents from 61.73 cents. ``The headlines are sufficiently gloomy for nervous markets to knock the Aussie lower,'' said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney, referring to the currency by its nickname. ``The minutes reflect the extremely worrying conditions at the time and obviously there's only been a degree of improvement.'' Australia's dollar was 1.3 percent down at 70.53 yen, from 71.46 yesterday. New Zealand's currency traded 0.6 percent lower at 62.59 yen from 62.98 yesterday. ``The material change to the balance of risks surrounding the outlook for growth and inflation in Australia meant that a significantly less-restrictive stance of monetary policy was now appropriate,'' members of the Reserve Bank's board said in minutes of their Oct. 7 meeting. Global Crisis The currencies reversed earlier gains after the RBA minutes indicated that the global credit crisis had outweighed the threat that a larger-than-expected rate reduction would erode market confidence. The RBA lowered borrowing costs by the most since 1992 to 6 percent this month. Speaking later in the day, Governor Glenn Stevens said threats of a ``global catastrophe'' had declined after governments worldwide outlined plans to stabilize the financial system. ``At moments like this, it's hazardous to make predictions,'' Stevens said in a speech in Sydney. ``However, it seems to me that the key elements of dealing with the root issues in the crisis are starting to come into place.'' The currencies advanced earlier in the day as U.S. stocks rose and the VIX volatility index, a gauge reflecting expectations for stock-market price changes and risk appetite, fell to 52.97 yesterday from a record 70.33 on Oct. 17. New Zealand's dollar fell as a report showed the nation's annual inflation rate accelerated to the fastest pace in more than 18 years in September. New Zealand Inflation The consumer price index rose 5.1 percent in the year ended Sept. 30, the most since 1990, Statistics New Zealand said in Wellington today. The result matched the median estimate of 14 economists surveyed by Bloomberg. From the second quarter, prices rose 1.5 percent. Traders are betting that Reserve Bank of New Zealand Governor Alan Bollard will cut interest rates by 1 percentage point on Oct. 23, according to a Credit Suisse index based on overnight swaps trading. ``Further deterioration in global growth prospects likely leaves the RBNZ confident that inflation will come down in the long-term,'' wrote a team of analysts led by Singapore-based David Forrester, a currency economist at Barclays Capital, in a research note today. The ``dovish RBA minutes and Governor Stevens'' may provide an opportunity to buy the Australian dollar against New Zealand's currency before Australia's inflation data tomorrow, Barclays said. The median estimate of 16 economists polled by Bloomberg News is for prices to have risen 1 percent in the quarter ended Sept 30. The Australian currency traded 0.8 percent lower at NZ$1.1255 from 1.1347 yesterday. Australian government bonds rose. The yield on the 10-year note fell 12 basis points, or 0.12 percentage point, to 5.147 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 rose 0.921, or A$9.21 per A$1,000 face amount, to 100.815. New Zealand's two-year swap rate, a fixed payment made to receive floating rates, rose to 6.338 percent today from 6.305 yesterday. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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