Australian Dollar Slides From One-Week High as Spending Falls

Nov. 26 (Bloomberg) -- The Australian dollar slipped from a one-week high as business investment unexpectedly fell in the third quarter, damping demand for the nation’s assets. New Zealand’s currency also weakened.

Both currencies were lower on reports that Dubai World, with $59 billion of liabilities, is seeking to delay debt payments. Declines in the Australian dollar may be limited as traders bet the nation’s central bank will raise interest rates on Dec. 1 for a record third month.

“The capital expenditure numbers were disappointing with the market looking for a sign investment is turning around,” said Greg Gibbs, a currency strategist in Sydney with Royal Bank of Scotland Group Plc. “The Dubai World announcements regarding their stance on debt may be causing some risk aversion.”

Australia’s currency fell 0.5 percent to 92.79 U.S. cents as of 12:13 p.m. in Sydney from 93.21 cents in New York yesterday. It earlier touched 93.23 cents, its strongest since Nov. 18. The currency declined 0.4 percent to 81.09 yen from 81.41.

New Zealand’s dollar slid 0.6 percent to 72.84 U.S. cents from 73.25 cents in New York yesterday. It bought 63.65 yen from 63.99 yen.

Capital spending in Australia declined 3.9 percent from the previous quarter, when it rose a revised 2.1 percent, the Bureau of Statistics said today. The median estimate of 19 economists surveyed by Bloomberg was for a 1 percent advance.

Balance of Risks

Investors should buy the Australian dollar at these levels as “the balance of risks still favors a move in December from the central bank,” Gibbs said.

Benchmark interest rates are 3.5 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.

Swaps traders are betting on a 75 percent chance that the Reserve Bank of Australia will increase its target rate by 25 basis points next week, according to a Credit Suisse Group AG index based on swaps trading.

Australian government bonds rose, pushing the yield on 10- year notes down to a six-week low of 5.35 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 rose 0.065, or A$0.65 per A$1,000 face amount, to 99.39. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was little changed at 4.41 percent.