Australia’s dollar may fall to its weakest level against the yen as Japan’s deepening recession pushes the Nikkei 225 Stock Average toward a 26-year low. The CHART OF THE DAY shows Aussie-yen, as the exchange rate is known, now has a correlation with the Nikkei 225 of 0.982, the highest since 1972, according to data compiled by Bloomberg. The currency’s correlation with the Nikkei has risen the past year as signs of a worsening slump in the world’s second-largest economy spurred investors to sell higher-yielding assets financed with yen loans and cut holdings of Japanese shares. “Stocks are falling and risk aversion is rising,” said Ryohei Muramatsu, manager of Group Treasury Asia in Tokyo at Commerzbank AG, Germany’s second-biggest lender. “This is fueling buying of the yen against major currencies including Australia’s dollar.” Australia’s dollar rose 0.8 percent to 59.10 yen as of 9:05 a.m. in Tokyo from 58.76 yen late in New York yesterday. It reached 55.14 yen on Oct. 24, the weakest since 1971 when Bloomberg began compiling the data. The Nikkei 225 declined 0.8 percent to 7,682.14 yesterday from 7,745.25 on Jan. 23. It touched 6,994.90 on Oct. 28, 2008, the lowest since October 1982. The Australian currency fell 5 percent against the yen and the Nikkei 225 dropped 5.9 percent over the previous week, both declining for a third week. The previous peak for correlation between the currency and the Nikkei 225 was in June 1996, when the figure climbed to 0.942. A reading of 1 means the two move in lock step.

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