Sept. 16 (Bloomberg) -- The Australian dollar headed for its first weekly drop in four as declining copper and nickel prices damped the outlook for export growth.

Copper prices fell in New York yesterday for a third day as global stockpiles climbed to the highest in more than 10 months, and nickel prices slumped to a nine-month low in London. The currency's fortunes are tied to metals prices as raw materials make up almost 60 percent of Australia's export earnings.

``The path of least resistance for the Australian dollar is down,'' said Adam Carr, senior economist at St.George Bank Ltd. in Sydney. ``Base-metal prices are likely to continue to come off a bit as inventories rebuild.''

Australia's currency dropped to 76.70 U.S. cents at 10:10 a.m. in Sydney from 76.93 cents in late Asian trading yesterday and 77.14 cents a weak ago.

Carr said the currency will probably weaken to about 76.50 cents next week on speculation the U.S. Federal Reserve will raise borrowing costs next week for an 11th straight time, reducing the rate premium for holding Australia's currency.

Australia is the world's fourth-biggest producer of copper, which had a 0.83 correlation with the currency in the past three years. A reading of 1 suggests the two move lock-step.

Reserve Bank of Australia Governor Ian Macfarlane is counting on rising Australian exports to help fuel economic growth amid a slowdown in consumer spending and housing. Global sales of raw materials contribute about 10 percent to economic output.

The currency may decline to 70 cents by year-end, Carr said.

The yield on the Australian government's 6.25 percent bond maturing in April 2015 rose 3 basis points to 5.19 percent. A basis point is 0.01 percentage point. The price fell 0.268 or A$2.68 per A$1000 face amount, to 107.909.

To contact the reporter on this story: Fergus Maguire in Canberra, Australia at fmaguire@bloomberg.net

Last Updated: September 15, 2005 20:10 EDT