By Candice Zachariahs Oct. 23 (Bloomberg) -- The Australian and New Zealand currencies slid for a third day against the U.S. dollar and Japan's yen as tumbling stock and commodity prices prompted investors to dump higher-yielding assets. The South Pacific nations' dollars fell as the Standard & Poor's 500 Index dropped yesterday to the lowest level since April 2003. Exxon Mobil Corp. tumbled 9.7 percent and Freeport- McMoRan Copper & Gold Inc. plunged 18 percent as crude, copper and gold fell. Raw materials account for 60 percent of Australia's exports and 70 percent of New Zealand's. ``People are very worried about the global recession, about the meltdown we're seeing in emerging markets,'' said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. ``People are bailing out of growth-sensitive currencies like the kiwi in favor of safe-haven currencies,'' she said, using the New Zealand's dollar's nickname. Australia's dollar fell 1.5 percent to 65.08 yen at 1:11 p.m. in Sydney from 66.02 late in Asia trading yesterday. New Zealand's dollar dropped to 56.81 yen, the lowest since September 2003, before trading at 57.86 yen from 58.84 yesterday. The Australian dollar slipped 0.5 percent to 66.54 U.S. cents from 66.88 cents late in Asia yesterday. New Zealand's dollar traded at 59.29 U.S. cents, from 59.60 cents yesterday. Commodities, Stocks Australia's dollar fell 37 percent against the yen and 34 percent versus the dollar over the past three months as concern over global growth has sent equities and commodities tumbling worldwide. New Zealand's dollar declined 29 percent and 21 percent against the yen and greenback, respectively. Benchmark interest rates are 6 percent in Australia and 6.5 percent in New Zealand, compared with 0.5 percent in Japan and 1.5 percent in the U.S., attracting investors to the South Pacific nations' assets. The risk in such trades is that currency market moves will erase profits. New Zealand's currency rallied briefly after the Reserve Bank of New Zealand lowered its benchmark rate by a record 1 percentage point from 7.5 percent. It earlier slipped to the lowest since September 2003 against the yen as traders speculated the central bank might cut more aggressively than the 100 basis points estimated by economists. The currencies fell for a third day as shares in Australia and New Zealand followed the U.S. equity markets lower. The S&P 500 extended its 2008 retreat to 39 percent yesterday, poised for its worst yearly performance since 1931. The benchmark index for U.S. equities has fallen 43 percent from its peak last October. In Australia, BHP Billiton Ltd., the world's biggest mining company lost 10 percent after copper dived to a three-year low. The UBS Bloomberg Constant Maturity Commodity index of 26 raw materials fell for a second day yesterday and has dropped 24 percent since the beginning of this year. Gold, Australia's third most valuable raw material export, dropped to its lowest price in a year. Risk Aversion The VIX volatility index, a gauge reflecting expectations for stock-market price changes and risk appetite, rose to 69.65 yesterday. The VIX rose to a record 70.33 on Oct. 17. ``Currencies are rapidly returning towards their fair value levels as investors de-leverage and unwind carry trades and investments in emerging markets and commodities,'' wrote Zurich- based Mansoor Mohi-uddin in a note dated Oct. 22. ``This makes return of capital to home markets the critical driver of the currency markets now.'' Australian government bonds rose for a fourth day. The yield on the benchmark 10-year note fell 9 basis points to 5.036 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 rose 0.708, or A$7.08 per A$1,000 face amount, to 101.707. A basis point equals 0.01 percentage point. New Zealand's two-year swap rate, a fixed payment made to receive floating rates, was unchanged at 6.28 percent. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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