The Australian dollar was set for its first weekly decline in a month as concerns over a deteriorating U.S. economy curbed demand for higher-yielding assets. The currency halted a four-week run of gains as the number of Americans collecting unemployment benefit surged to a 26-year high. U.S. non-farm payrolls data due later today may show that unemployment in the world’s largest economy is at its highest since 1993. President-elect Barack Obama warned that the U.S. risks sinking deeper into an economic crisis without a stimulus package of about $775 billion. “Longer-term there are some very dark clouds on the horizon for the world economy,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Sydney. “Global trade is really collapsing, so I would expect to see further weakness in the Australian dollar.” Australia’s dollar slipped 0.5 percent to 70.78 U.S. cents as of 3:49 p.m. in Sydney from 71.13 late on Jan. 2 in New York. The currency fell 1.2 percent to 64.56 yen. New Zealand’s dollar is headed for its fifth weekly gain, having climbed 1.2 percent to 59.19 U.S. cents. Against the yen, it’s up 0.5 percent at 54.07. The Australian currency may trade between 70 and 72 U.S. cents today and is more likely to move toward the bottom of that range, Cavenagh said. It may break below 70 cents in the next two weeks. New Zealand’s dollar probably will trade between 58 and 60 U.S. cents in coming weeks, he said. Commodities, Rates Investors should sell Australia’s dollar as prices of commodities that the nation exports may extend losses and the central bank is likely to lower interest rates, according to Australia & New Zealand Banking Group Ltd. It’s an “ideal time” for Australian dollar sellers to trim their holdings, analysts led by Amy Auster, Melbourne-based head of foreign exchange and international economics research at ANZ, wrote in a research note yesterday. The currency the previous day reached a three-month high of 72.69 U.S. cents. “ANZ projects further falls in commodity prices,” Auster and Amber Rabinov, an economist, wrote in the note. “The Australian dollar’s yield advantage should decline as the Reserve Bank of Australia continues to cut interest rates.” Australia’s fourth-largest bank predicts the local dollar will fall to 63 U.S. cents by the end of March and will weaken further to 54 cents by year-end, according to the note. The median forecasts of 38 analysts surveyed by Bloomberg News are for 62 cents and 67 cents, respectively. Yield Advantage The benchmark interest rate in Australia is 4.25 percent, even after reductions totaling three percentage points in the last four months of 2008. That compares with rates of 0.1 percent in Japan and as low as zero in the U.S., making Australia an attractive destination for international investors seeking higher returns. Australian government bonds rose. The yield on the 10-year note fell two basis points, or 0.02 percentage points, to 4.12 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 rose 0.199 or A$1.99 per A$1,000 face amount, to 109.346. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was down 12 basis points at 4.28 percent.

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