By Candice Zachariahs Nov. 20 (Bloomberg) -- The Australian and New Zealand dollars dropped the most in a week on speculation a plunge in regional stocks and the prospect of more interest-rate cuts prompted investors to pare holdings of the nations' assets. The currencies extended the week's losses against the U.S. dollar as Australia's benchmark share index slumped as the price of commodities the countries export declined. Traders are betting the Reserve Bank of Australia will extend its steepest rate- cutting cycle since 1991 when it meets in December, reducing its yield advantage. ``Stock markets are the leader as a reflection of risk appetite and while they remain under pressure it's hard to sense a turn in the outlook for global growth,'' said Tony Morriss, a senior currency strategist in Sydney at Australia & New Zealand Banking Group. ``The pressure will remain on the downside for the Aussie,'' he said. Australia's currency dropped 1.3 percent to 63.87 U.S. cents as of 2:45 p.m. in Sydney from 64.72 cents late in Asia yesterday. The currency fell 2.6 percent to 61.14 yen from 62.70 in Asia yesterday. New Zealand's dollar was 1.3 percent lower at 54.15 U.S. cents from 54.89 in Asia yesterday. It bought 51.81 yen from 53.18 yen. The RBA today said it bought A$3.15 billion ($2 billion) of its own currency in October, the biggest net purchase on record. Traders are betting that Australian policy makers will lower borrowing costs by at least 75 basis points on Dec. 2, according to a Credit Suisse index based on overnight swaps. The chance of a 100 basis point cut is 89 percent, the index shows. Bonds Rise Benchmark interest rates are 5.25 percent in Australia and 6.5 percent in New Zealand, compared with 0.3 percent in Japan and 1 percent in the U.S. ``The question will be whether we need to be on the expansionary side of neutral,'' with monetary policy, RBA Governor Glenn Stevens said yesterday. ``That is what we'll be asking ourselves each month.'' The current rate could be considered neutral, he said. Australian government bonds advanced. The yield on the 10- year note fell 5 basis points, or 0.05 percentage point, to 4.79 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 was higher by 0.416, or A$4.16 per A$1,000 face amount, at 103.699. New Zealand's two-year swap rate, a fixed payment made to receive floating rates, fell to 5.33 percent from 5.425 yesterday. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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