June 16 (Bloomberg) -- The Australian and New Zealand dollars fell toward the lowest in a week against the U.S. currency as Asian stocks extended a worldwide decline in equities, dulling investor appetite for higher-yielding assets. Australia’s dollar dropped to a two-week low versus the yen as central bank minutes of its June 2 meeting showed officials said the inflation outlook allowed for further interest-rate cuts. Both currencies fell the most since June 3 against the U.S. dollar yesterday as the MSCI World Index had its biggest decline in almost two months and commodity prices fell. “You’ve seen the U.S. dollar rebound and equity market weakness,” said Tim Kelleher, manager of institutional banking and markets in Auckland at Commonwealth Bank of Australia. “We’re likely to see equity market weakness carry on for another week or two so we can see the kiwi back between 55 and 60 U.S. cents and the Aussie dollar back between 75 and 78 cents,” he said, referring to the currencies by their nicknames. Australia’s currency fell 0.3 percent to 79.26 U.S. cents as of 4:06 p.m. in Sydney from 79.51 cents in New York yesterday, when it slid as much as 2.7 percent. It earlier declined to 78.62 cents, its weakest since June 9. The currency dropped 2 percent to 76.26 yen and slipped as low as 76.07, the least since June 1. New Zealand’s dollar declined 0.3 percent to 62.94 U.S. cents from 63.11 in New York and earlier touched 62.40, the weakest since June 10. It bought 60.55 yen from 61.74. Benchmark interest rates are 3 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero percent in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits. RBA Minutes “Board members did not see a pressing case for any further action at this meeting, though they viewed the inflation outlook as affording scope for some further easing of monetary policy,” policy makers said in the minutes. Governor Glenn Stevens left the benchmark rate unchanged at 3 percent at the meeting. “The RBA’s bias is still that rates may need to come down further at some stage, though the easing bias is less compared to a few months ago,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Sydney. “The Aussie will continue to be supported on dips, but we could see a retest of 78.50 U.S. cents and a move further towards 77.50 cents over the course of the week.” ‘Double Top’ The Australian dollar may fall toward a one-month low after it formed a “double top” above 82 U.S. cents, Royal Bank of Scotland Group Plc. said in a note to clients today. The currency “appears on its way to test the lower end of its current range around 78 cents,” wrote Greg Gibbs, a currency strategist at Royal Bank of Scotland in Sydney. “It would not surprise me to see a probe towards 75 cents,” on continued equity weakness. A double top forms on a chart when a currency rises, falls and climbs back to near its earlier high before dropping again. The South Pacific nations’ currencies also declined today as Japanese Finance Minister Kaoru Yosano said his government has absolute trust in U.S. Treasuries and the dollar, easing concern foreign governments may sell U.S. government debt. Japan’s confidence in U.S. Treasuries and the dollar “is absolutely unshakable,” Yosano said at a news conference in Tokyo today. “I have faith in the U.S. dollar’s status as a reserve currency.” Australian government bonds advanced. The yield on 10-year notes fell seven basis points, or 0.07 percentage point, to 5.44 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 rose 0.480, or A$4.80 per A$1,000 face amount, to 98.59. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.78 percent from 3.82 yesterday.

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