The Australian and New Zealand dollars maintained yesterday’s decline versus the yen as a referendum pledge by Greece’s Prime Minister renewed speculation the European nation will default. Australia’s dollar pared earlier losses against its U.S. counterpart even after a report showed home-building approvals fell in September. The so-called kiwi weakened against most of its 16 major peers as declines in commodity prices and Asian stocks damped demand for riskier assets. “The chances of a disorderly default in Greece are somewhat higher now than this time last week, so I think the market is right to be concerned about what’s happening over there,” said Gavin Stacey, chief interest-rate strategist at Barclays Plc in Sydney. Australia’s currency may drop to 93.88 U.S. cents by the end of this month, he said. Australia’s dollar weakened 0.1 percent to 80.87 yen as of 2:40 p.m. in Sydney from 80.94 yesterday in New York, when it slid 1.7 percent. The so-called Aussie traded at $1.0353 from $1.0329 yesterday after earlier falling as much as 0.5 percent. The New Zealand dollar dropped 0.4 percent to 62.05 yen after losing 1.2 percent yesterday. The currency fell 0.1 percent to 79.42 U.S. cents. The MSCI Asia Pacific Index of stocks dropped 1.2 percent. The MSCI World (MXWO) Index of equities tumbled 3.5 percent yesterday, while the Thomson Reuters/Jefferies CRB Index of raw materials declined 1.4 percent. Greek Referendum Greece’s cabinet gave Prime Minister George Papandreou unanimous backing for his plans to hold a referendum on the country’s latest bailout package, a government official told reporters in Athens today. Government spokesman Elias Mosialos said the referendum will be held “as soon as possible.” A vote of confidence in parliament is also scheduled to begin today and to conclude at the end of this week. Austerity measures by the government to reduce the deficit have eroded Papandreou’s popularity and sparked a wave of social unrest. French President Nicolas Sarkozy will meet with German Chancellor Angela Merkel, as well as officials from the International Monetary Fund and European institutions to discuss the Greek situation today. They will meet in Cannes, France, where a Group of 20 nations summit is due to take place starting tomorrow. Building Approvals Australian home-building approvals dropped 13.6 percent in September from a month earlier, the Bureau of Statistics said in Sydney today. The median forecast in a Bloomberg News survey of economists was for a 4.9 percent decline. “We are still experiencing a downtrend in new home approvals,” Roland Randall, an economist at Toronto-Dominion Bank’s TD Securities unit in Singapore, wrote in a research note today. “But we are seeing some interest return to the property market more broadly. Lower interest rates do of course help.” The Reserve Bank of Australia yesterday lowered interest rates for the first time in 31 months, reducing the benchmark by a quarter-percentage point to 4.5 percent. Futures traders expect the central will cut at least an additional 25 basis points by the end of the year. “Interest rates are still relatively high in Australia and it’s still showing more cyclical strength than most major economies,” said Todd Elmer, head of Group-of-10 currency strategy for Asia excluding Japan at Citigroup Inc. in Singapore. “It enjoys a much stronger fiscal position than most of the major economies and it remains a very attractive target for reserves managers. We really don’t see any reason to shift away our medium term positive view on the Aussie.” To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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