The Australian and New Zealand dollars dropped to the lowest in more than a week amid concern Europe’s sovereign debt crisis and a slowing U.S. economy will dent global growth, damping demand for higher-yielding assets. The so-called Aussie fell for a third day against the yen as a government report showed a wider than expected current- account deficit and traders increased bets the Reserve Bank of Australia will cut interest rates next month. Economists say policy makers will keep the benchmark rate unchanged at 4.75 percent today. New Zealand’s currency dropped against all 16 of its most-traded peers as Asian stocks slid. “European sovereign issues and a weaker U.S. economy result in a downward revision of global growth,” said Richard Grace, the Sydney-based chief currency strategist and head of international economics at Commonwealth Bank of Australia. “That’s the biggest risk, because it would result in a fall in commodity prices, particularly base-metal commodity prices and that would put downward pressure on the Australian dollar.” Australia’s currency fell to $1.0528 as of 11:40 a.m. in Sydney from $1.0551 yesterday, and touched $1.0502, the least since Aug. 26. It dropped 0.3 percent to 80.90 yen. New Zealand’s dollar slid as low as 82.66 U.S. cents, the least since Aug. 25, before buying 82.93 cents from 83.22 cents yesterday. The currency weakened to 63.80 yen from 63.98 yen. The London Metals Index, tracking the prices of copper, aluminum, lead, tin, zinc and nickel, dropped 1.6 percent yesterday, declining for a third session. 　　　　　　　　　 Global Growth Australia’s dollar depreciated against all but one of its 16 major peers before a German Economy Ministry report today that’s forecast to show factory orders in July fell for the first time since March. German orders dropped 1.5 percent from the previous month, according to the median estimate of economists surveyed by Bloomberg News. Services activity in the U.S. probably slowed in August, according to a separate Bloomberg poll of economists. The Institute for Supply Management’s index of non-manufacturing businesses fell to 51 last month from 52.7 in July, the Tempe, Arizona-based group is forecast to say later today. Figures greater than 50 signal expansion. Current-Account Deficit Australia’s current-account deficit was A$7.42 billion ($7.81 billion) in the second quarter, the Bureau of Statistics said in Sydney today. The median estimate in a Bloomberg survey of economists was for a A$7.1 billion gap. Futures show traders are betting the RBA will reduce its benchmark interest rate to 4.45 percent by October from its current level of 4.75 percent. All 25 economists surveyed by Bloomberg predict that the central bank will keep rates unchanged at its policy meeting today. Benchmark interest rates in Australia and New Zealand, which has a key rate of 2.5 percent, are higher than in countries such as the U.S. and Japan, where they are as low as zero. Investors are attracted to the South Pacific nations’ higher-yielding assets, although the risk is that currency market moves will erase profits. Australian government bonds advanced on concern Europe’s debt crisis will derail global economic growth, driving down the 10-year yield to the lowest since March 20, 2009. The yield on the benchmark 5.75 percent security dropped to 4.157 percent and stood at 4.168 percent according to Bloomberg data. The MSCI Asia Pacific Index fell 0.8 percent and Standard & Poor’s 500 futures signaled the U.S. stocks gauge may also extend a two-day losing streak when the market reopens after yesterday’s Labor Day holiday. To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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