July 7 (Bloomberg) -- The Australian and New Zealand dollars declined on concern that economic growth is slowing, adding to signs that interest rates in the South Pacific nations may have peaked.

Australia's currency, known as the Aussie, fell from near a 25-year high after reports showed the construction industry shrank for a fourth month in June and job-vacancy advertisements dropped by the most in almost two years last month. New Zealand's currency extended the past month's loss to 1.6 percent after the Treasury Department said the economy may have been in a recession in the first half of 2008.

The reports ``will detract from the probability the Reserve Bank of Australia will be tightening again,'' said Peter Pontikis, a treasury strategist at Suncorp-Metway Ltd. in Brisbane, Australia. ``For that reason, I don't think bullish strategies on the Aussie dollar are really going to cut it at the moment.''

The Australian dollar fell to 95.86 U.S. cents as of 4:50 p.m. in Sydney from 96.34 cents late in New York on July 4 and a 25-year high of 96.68 cents reached June 30. The currency traded at NZ$1.2697 from NZ$1.2702 on July 4 when it touched NZ$1.2729, the strongest since January 2001.

The New Zealand dollar declined to 75.49 U.S. cents from 75.93 cents late in New York on July 4. The currency was at 81.18 yen from 81.07 yen.

Construction, Job Advertisements

Australia's dollar fell as an index measuring construction rose to 40.3 points last month from 36.9 in May, according to a report by the Australian Industry Group and Housing Industry Association released in Sydney today. A reading below 50 indicates the construction industry is declining.

Jobs advertised in newspapers and on the Internet fell 3 percent from May to an average of 262,075 a week, the biggest drop since November 2006, according to an Australia & New Zealand Banking Group Ltd. report released in Melbourne today.

Traders are betting the RBA will raise its 7.25 percent benchmark interest rate by 12 basis points in the next 12 months, compared with 14 basis points on July 4, according to Credit Suisse Group index based on based on interest-rate swaps.

Losses in Australia's currency may be limited before a government report this week that is forecast by economists to show employment rebounded last month.

``We're still bullish on the Australian dollar,'' said Sue Trinh, a currency strategist at RBC Capital Markets in Sydney. ``Any upside surprise in jobs should push the Australian dollar through its highs.''

Australia's dollar will reach parity with the U.S. dollar this year, Trinh said. RBC, a unit of Canada's biggest bank, is one of three banks predicting the two currencies will trade one for one this year among 33 surveyed by Bloomberg News. The median estimate is for an exchange rate of 91 cents by year-end.

`To Underperform'

Australian companies added 10,000 workers in June after cutting 19,700 in May, according to the median estimate of 22 economists surveyed by Bloomberg. The Bureau of Statistics will release the report on July 10.

New Zealand's dollar may extend its 5.1 percent decline of the past three months on concern rising oil prices and falling stock markets will prompt investors to sell higher-yielding assets funded in Japan, known as carry trades.

``Our central view remains to expect the New Zealand dollar to underperform,'' said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. ``Risk appetite continues to feel vulnerable with rising fuel prices and falling equity markets, an environment which has so far limited the New Zealand dollar's ability to sustain any rally of note.''

Crude oil climbed to a record $145.85 a barrel and U.S. stocks fell last week, sending the Dow Jones Industrial Average into a bear market as it retreated 20 percent from a record.

RBNZ Rate Bets

``There is a possibility that the economy has experienced a technical recession'' in the first half of this year as high fuel and credit costs crimped spending, New Zealand's Treasury Department said in a report posted on its Web site today. ``It is too early to provide precise estimates.''

Growth in the year ending March 31, 2009, is likely to be closer to 1 percent than the 1.5 percent predicted in its May forecasts, the department said.

Reserve Bank of New Zealand Alan Bollard last month said it is ``likely'' he will cut the official cash rate from 8.25 percent, the highest of any nation with an Aaa credit rating, as growth slows.

In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the borrowing and lending rate. The risk is that currency market moves erase those profits.

There is a 33 percent chance of a New Zealand rate reduction this month, according to an index calculated by Credit Suisse based on overnight swaps trading.

Government Bonds

Australian and New Zealand 10-year government bonds advanced for a third day. The Australian 10-year yield declined 7 basis points, or 0.07 percentage point, to 6.35 percent. The price of the 5.25 percent bond maturing in March 2019 increased 0.520, or A$5.20 per A$1,000 face amount, to 91.545.

New Zealand 10-year government debt yield fell to 6.31 percent from 6.33 percent on July 4. The price of the 6 percent bond maturing in December 2017 rose to 97.834 from 97.709. Yields move inversely to prices.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Tracy Withers in Wellington at twithers@bloomberg.net

Last Updated: July 7, 2008 03:50 EDT