The Australian and New Zealand dollars fell for a second day on concern U.S. government stress tests will reveal additional bank losses, damping optimism the worst of the global recession may be over. The currencies extended losses from yesterday when U.S. stocks fell and the International Monetary Fund said Australia’s and New Zealand’s economies will shrink in 2009 at the fastest pace in more than 20 years. The IMF estimates are “bleak” and the Australian government will do all it can to turn the economy around, Treasurer Wayne Swan said today. “Equity markets are very top heavy and the Aussie dollar is struggling to break the top range,” said Masafumi Yamamoto, head of foreign-exchange strategy for Japan at Royal Bank of Scotland Group Plc in Tokyo and a former Bank of Japan currency trader. “We are going back into the bearish trend for Aussie, kiwi and other higher-yielding currencies.” Australia’s dollar declined to 70.42 U.S. cents as of 1:01 p.m. in Sydney, from 70.54 cents yesterday in New York, when it slid 0.9 percent. It dropped to 68.87 yen from 69.14 yen. New Zealand’s currency fell to 55.42 U.S. cents from 55.54 cents, and weakened to 54.21 yen from 54.44 yen. The Australian and New Zealand dollars may add to this week’s declines after the IMF said the countries’ central banks can cut interest rates further to cushion their economies from the global recession. The currencies have both dropped by more than 2 percent against the U.S. dollar this week, the largest declines among the 16 most-traded currencies. Rate Cuts Australia’s central bank Governor Glenn Stevens lowered the benchmark lending rate this month to a 49-year low of 3 percent, the same level set on March 12 by Alan Bollard, who heads the Reserve Bank of New Zealand, where rates are now at a record low. Bollard will reduce New Zealand’s benchmark to 2.5 percent at an April 30 central bank meeting, according to a Bloomberg News survey of economists. The Standard & Poor’s 500 Index lost 0.8 percent yesterday as Morgan Stanley, the fifth-biggest U.S. bank by assets, tumbled 9 percent after posting a wider-than-estimated loss. “There was a disappointing close last night for U.S. equities and commodities were a bit weaker so that sapped demand for the two currencies,” said Robert Rennie, chief currency strategist at Westpac Banking Corp. in Sydney. “The Australian dollar has reached something of an intermediate top and will struggle to break above 72.50 U.S. cents in the short term.” The Australian currency may find sellers if it climbs above 71.2 U.S. cents today and is set for a drop toward 68 U.S. cents in the medium term, Rennie said. Government Bonds Australian government bonds fell for a second day as Treasurer Swan said the government will increase spending to counter an “inevitable” recession. “The deepening global recession will have severe consequences for the budget’s forecasts for economic growth, unemployment and revenue, which will be substantially worse than reported in February,” Swan said in a statement from Canberra. The yield on Australia’s benchmark 10-year bond rose four basis points to 4.50 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 fell 0.314 or A$3.14 per A$1,000 face value, to 105.965. A basis point is 0.01 percentage point. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.575 percent from 3.59 percent yesterday.

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