The Australian and New Zealand dollars declined as Asian stocks extended last week’s biggest slide since 2008 on concern the U.S. economy will stall, sapping demand for higher-yielding investments. The so-called Aussie fell to the lowest level against the dollar since April 5 after Standard & Poor’s cut the U.S. long- term credit rating one level to AA+ on Aug. 5. New Zealand’s dollar dropped for the fifth time in six days versus the greenback after prices slumped for commodities that make up a majority of the South Pacific nation’s exports. “People are looking at the global growth scenario, which is not going to be pretty under any path that the U.S. follows after the downgrade,” said Alex Sinton, an Auckland-based senior dealer at ANZ National Bank Ltd. “It is a risk-off day. It’s probably going to have the Aussie dollar under pressure.” Australia’s dollar weakened to $1.0316 as of 2:28 p.m. in Sydney from $1.0442 in New York on Aug. 5 after dropping to as low as $1.0313. It fell to to 80.52 yen from 81.87 yen after touching 80.49 yen, the weakest since March 21. New Zealand’s dollar slid 1.8 percent to 82.81 U.S. cents and declined to as low as 82.63 cents, the weakest since July 13. The so-called kiwi dropped to 64.63 yen from 66.10 yen. The MSCI Asia Pacific index of regional shares fell 3.6 percent, declining for a fifth day. Australia’s S&P/ASX 200 Index dropped 2.5 percent to its lowest intraday level since July 2009. S&P 500 futures expiring in September lost 2.7 percent to 1,166. Commodities Slump Crude oil dropped as much as 3.7 percent in afterhours trading on the New York Mercantile Exchange and copper on the London Metal Exchange lost as much as 1 percent. The Thomson Reuters/Jefferies CRB Index of raw materials fell 4.5 percent last week, its biggest decline since the five days ended May 6. The Australian dollar is likely to extend last week’s biggest drop in more than a year and may slide to $1 as investors dump higher-yielding assets after S&P cut the U.S.’s credit rating, according to UBS AG. Investors may benefit by selling the Aussie at $1.0420 and should exit the trade if the currency climbs to $1.0510, Gareth Berry, a strategist at UBS in Singapore, wrote in a note to clients. “It seems like the market is pricing in some kind of major, almost disaster that would prompt the Reserve Bank of Australia to cut many times over the next 12 months,” Berry said in a phone interview today. “If the market’s starting to think that in the rates space, the foreign-exchange markets are going to be impacted by that as well over the coming days and weeks.” Cash-Rate Futures Yields on December interbank cash-rate futures fell to 3.5 percent on the Sydney Futures Exchange from 3.55 percent on Aug. 5, indicating traders see a 100 percent chance of at least a 75- basis-point rate cut from the RBA by December. The Aussie may rebound from its losses last week as demand for commodities aids the nation’s economy and its U.S. counterpart weakens, Commonwealth Bank of Australia said. The Aussie dollar may rise to $1.08 by September, Sydney-based currency strategist Joseph Capurso wrote in a note to clients today. The New Zealand dollar will appreciate to 85 cents in three months, 87 cents in six months and 90 cents in a year, Philip Borkin, an economist with Goldman Sachs & Partners New Zealand Ltd. in Auckland, wrote in an Aug. 5 research note. The Reserve Bank of New Zealand probably will raise the benchmark interest rate 50 basis points, or 0.5 percentage point, to 3 percent at its meeting next month, he wrote. Yields on Australia’s three-year debt climbed to 3.71 percent today, after a 69-basis-point drop to 3.67 percent last week, the biggest slide since February 1993. Ten-year yields climbed six basis points, or 0.06 percentage point, to 4.53 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, declined eight basis points to 3.28 percent after earlier dropping to as low as 3.22 percent, the least since March 18. To contact the reporter on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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