Australia’s dollar fell to a three- week low on speculation minutes of the central bank’s August meeting released tomorrow will show policy makers are likely to extend a pause in raising interest rates. New Zealand’s dollar dropped to five-week low after a report showed the nation’s service industry expanded at the slowest pace since October and the Labour department said job growth will be modest. The two currencies also weakened as Asian stocks declined amid signs global growth is losing momentum. Reserve Bank of Australia Governor Glenn Stevens will speak at the University of Western Australia tomorrow. “RBA Board minutes on Tuesday and a speech by Governor Stevens that evening provide the domestic focus for the Aussie, but global stock markets and risk appetite are key,” said John Kyriakopoulos, head of foreign-exchange strategy in Sydney at National Australia Bank Ltd. “The Australian dollar’s fall last week looks to be the start of a correction.” Australia’s dollar fell to 89.08 U.S. cents as of 3:10 p.m. in Sydney from 89.29 cents in New York last week, after sliding to 88.60 cents, the lowest since July 22. The currency dropped 0.7 percent to 76.44 yen. New Zealand’s dollar declined 0.3 percent to 70.38 cents, after falling to 69.97 cents, the weakest since July 7. It slipped 0.7 percent to 60.42 yen. Australia’s currency will fall to 86 cents by end-September and New Zealand’s will trade at 71 cents, National Australia Bank predicts. Rate Pause RBA policy makers kept the overnight cash rate target at 4.5 percent at their Aug. 3 meeting, citing reduced pressure on house prices, less caution in financial markets and an outlook for domestic growth that’s “about trend.” The central bank has held borrowing costs unchanged for the past three months after boosting its key rate six times in the previous seven meetings. The so-called kiwi fell to a one-month low against the yen after Bank of New Zealand Ltd. and Business New Zealand said their index of the nation’s service industries fell to 50.5 in July from 55.1 in June. A reading above 50 signals the industry is expanding. New Zealand’s employment growth will be modest over the next three quarters, the Labour Department said today, citing a leading indicator based on business confidence, immigration, commodity prices and the stock market. The MSCI Asia Pacific index declined 0.2 percent after a Japanese government report showed gross domestic product grew at the slowest pace in three quarters, missing the estimates of all economists surveyed by Bloomberg News. Sell Kiwi Investors should sell New Zealand’s dollar against the Swiss franc as risk aversion is likely to increase, UBS AG said in a note to clients. UBS recommended selling the kiwi at 0.7420 franc targeting a drop to 0.72 franc, Gareth Berry, a Singapore- based currency strategist wrote in a note to clients. “Risk aversion is likely to increase further this week, following the very weak second-quarter GDP print out of Japan,” Berry said. “At the same time the recent string of weaker-than- expected New Zealand data may result in the RBNZ staying on hold for the rest of the year.” Futures traders raised bets to the highest since May that Australia’s dollar will gain against the greenback, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on an advance in the Australian dollar compared with those on a drop -- so-called net longs -- was 54,370 on Aug. 10, from 48,715 a week earlier. Australian bond futures rose. The 10-year contract for September delivery advanced to 95.025 on the Sydney Futures Exchange from 94.955 last week. The implied yield on the futures declined seven basis points to 4.98 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell three basis points to 3.82 percent.

Source