The Australian dollar dropped below 80 U.S. cents for the first time since August 2007 as prices tumbled for commodities the nation exports. The New Zealand dollar also fell.
The two currencies, favorites of the so-called carry trades, also declined against the yen after US equity markets slid amid growing concern about Lehman Brothers' ability to raise capital.
"The atmosphere is extremely negative for anything leveraged to global growth," said Peter Jolly, head of research at National Australia Bank in Sydney. "We've seen sizable falls in equities and commodities overnight and that's dragged the Australian dollar lower."
The Australian dollar fell 1.2% to 80.37 U.S. cents at 9:26 a.m. in Sydney from 81.39 cents in late Asian trading yesterday. It earlier touched 79.83, the lowest since August 2007. The Australian dollar bought 86.10 yen from 87.97 yen yesterday.
The New Zealand dollar fell 1.1% to 66.76 U.S. cents from 67.54 cents late in Asia yesterday. It bought 71.52 yen from 73 yen yesterday.
Jolly forecast that the aussie, as the currency is called, will trade between 70 and 80 cent for the next six months.
The Australian dollar was the worst performer among the 16 most-active currencies traded against the greenback after the price of gold, the country's third-most valuable raw material export, fell for a seventh straight session. Crude oil, the nation's fourth-most valuable commodity export, slipped to a five-month low.
Raw materials account for 60% of Australia's exports and sales of commodities such as lumber make up 70% of New Zealand's overseas shipments.
Stocks Declining
Australia and New Zealand currencies also declined against the yen as the Standard & Poor's 500 Index of U.S. stocks slumped 3.4%, its biggest drop since February 2007. Lehman, the fourth-largest U.S. securities firm, led financial shares lower and the drop in oil prices pushed energy companies down by the most in six years.
Share market declines often indicate investors are less willing to put their money into riskier assets using strategies such as carry trades. In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates. The risk is that currency market moves erase those profits. Borrowing costs stand at 7% in Australia and 8% in New Zealand, compared with 0.5% in Japan.
New Zealand's currency probably will become relatively less attractive to those seeking higher yields because Reserve Bank Governor Alan Bollard will probably cut the benchmark interest rate tomorrow, according to all 14 economists surveyed by Bloomberg News. Traders expect the rate will fall to 6.5% within a year, according to swaps trading.
