The Australian dollar fell from the strongest in a month and its bonds rose as investors speculated the central bank will lower interest rates because of the slowing global economy. New Zealand’s currency also declined, after touching a two- month high against the greenback, as the Federal Reserve said it will buy $300 billion of Treasuries. The U.S. currency yesterday slumped the most against the euro since September 2000 on concern the Fed’s decision will debase the greenback. “Given the environment I struggle to see the Aussie dollar and kiwi running away to the topside,” said Sue Trinh, a senior currency strategist at RBC Capital Markets in Sydney. “The Reserve Bank of Australia will cut rates in April and we’re still looking for further cash rate cuts from New Zealand’s Reserve Bank in coming months.” Australia’s currency fell 0.5 percent to 67.29 U.S. cents as of 1:53 p.m. in Sydney, after earlier touching 68.16 U.S. cents, the strongest since Feb. 9. The currency declined 0.9 percent to 64.52 yen from 65.08 yen late in New York yesterday. New Zealand’s dollar slid 0.8 percent to 54.01 U.S. cents after touching 54.71 U.S. cents, the most since Jan. 19. It dropped 1.1 percent to 51.83 yen from 52.40 yen. Interest rates are 3.25 percent in Australia and 3 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., prompting investors to purchase the South Pacific nations’ assets with money borrowed in the U.S. or Japan. The risk in such so-called carry trades is that exchange-rate moves can erase profits. ‘More Scope Than Most’ “In this environment, it’s not going to be possible for Australia to avoid some further weakness,” RBA Assistant Governor Malcolm Edey said today in Sydney. Australia has “more scope than most for macroeconomic policies to respond as needed,” he said. Traders are betting on a 63 percent chance that the RBA will lower borrowing costs by 0.5 percentage point when it meets April 7, according to a Credit Suisse Group index based on swaps trading. Australia’s economy unexpectedly contracted in fourth quarter for the first time in eight years. New Zealand’s central bank will lower rates by at least 25 basis points to 2.75 percent when it meets April 30, a separate Credit Suisse index shows. “New Zealand has a large offshore borrowing requirement and the stronger our currency the less attractive an investment destination we become,” said Imre Speizer, a market strategist in Wellington at Westpac Banking Corp. The kiwi may fall toward 53.50 U.S. cents over the next few days and will drop below 49 cents over three months, he said. Australian government bonds rose, ending four days of losses. The yield on the benchmark 10-year note fell 26 basis points, or 0.26 percentage point, to 4.09 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 gained 2.23, or A$22.30 per A$1,000 face amount, to 109.41. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 3.41 percent from 3.39 yesterday.

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