[Glanteeignile]

Aussie, N.Z. Dollars Fall Versus Yen as Asia Stocks Drop

The Australian and New Zealand dollars declined for a second day against the yen as Asian stocks extended a global rout, sapping demand for higher- yielding currencies.

The so-called Aussie was 0.2 percent from a six-month low versus the New Zealand dollar as swaps traders increased bets the Reserve Bank of Australia will cut interest rates next month. The New Zealand currency maintained a two-day slide against the dollar after a fall in demand for Spanish notes rekindled concern Europe’s prolonged debt crisis will hamper global growth.

“The drop in stocks is weighing on the Australian and New Zealand dollars,” said Takuya Kawabata, a researcher at Gaitame.com Research Institute Ltd. in Tokyo, a unit of Japan’s largest currency-margin company. “The Australian dollar is likely to remain soft because of speculation about rate cuts.”

The Aussie fell 0.2 percent to 84.56 yen as of 12:49 p.m. in Sydney from the close in New York yesterday. It was at $1.0285 from $1.0270. New Zealand’s dollar, nicknamed the kiwi, declined 0.1 percent to 67.12 yen. It traded at 81.63 U.S. cents after having dropped 0.5 percent to 81.48 yesterday.

The Australian dollar was little changed at NZ$1.2599. It touched NZ$1.2576 yesterday, the weakest since Oct. 6. Financial markets in Australia and New Zealand will be closed from tomorrow for holidays and will reopen on April 10.

The MSCI Asia Pacific Index of shares lost 0.6 percent after the MSCI All-Country World Index (MXWD) dropped 1.9 percent yesterday, the biggest slide since March 6.

RBA Rates
Traders see an 89 percent chance that the RBA will lower its benchmark interest rate to 4 percent from 4.25 percent at its next meeting on May 1, according to a Credit Suisse Group AG index based on overnight index swap rates. Yields on Australia’s three-year notes declined as much as six basis points to 3.38 percent, the lowest since Feb. 7.

The RBA said on April 3 that its board “thought it prudent to see forthcoming key data on prices to reassess its outlook for inflation, before considering a further step to ease monetary policy.” The central bank left the overnight cash-rate target unchanged.

The Australian and New Zealand dollars dropped yesterday as demand for riskier assets was curbed after Spain sold 2.59 billion euros ($3.4 billion) of bonds, less than its maximum target of 3.5 billion euros. The nation’s government debt slumped, with five-year yields climbing 25 basis points, the most since Dec. 8. Prime Minister Mariano Rajoy said Spain’s situation is one of “extreme difficulty.”

An index for service industries in China, Australia’s biggest trading partner and New Zealand’s second largest, fell to 53.3 last month from 53.9 in February, figures from HSBC Holdings Plc and Markit Economics showed today. Their gauge for the country’s manufacturing sector dropped to 48.3 in March from 49.6 the prior month. Figures below 50 indicate contraction.