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Aussie Dollar Falls as Spain Banking Crisis Escalates Concern

Australia’s dollar fell by the most this year as concern about Spain’s banking crisis escalated, reducing demand for higher-yielding assets.

New Zealand’s dollar declined as Spanish officials debated how to rescue BFA-Bankia, the nation’s third-biggest lender. The South Pacific nations’ currencies dropped as stocks and commodities slumped, reducing investor appetite for assets linked to growth.

The Aussie, as Australia’s currency is known, slid 1.5 percent to 97.04 U.S. cents yesterday in New York. The decline was the biggest since December. The currency dropped 2 percent to 76.74 yen.

New Zealand’s kiwi dollar fell 1.3 percent to 75.31 U.S. cents and lost 1.8 percent to 59.55 yen.

The MSCI World Index (MXWO) of equities and the Thomson Reuters/Jefferies CRB Index of raw materials each slid 1.7 percent.

Bankia group was nationalized on May 9, and the new management of the Spanish lender has asked for 19 billion euros ($23.5 billion) of public money to clean up its balance sheet. The European Central Bank denied yesterday that it had rejected a plan floated by the Spanish government to recapitalize Bankia, saying it hadn’t been approached.

To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net

To contact the editor responsible for this story: Robert Burgess at bburgess@bloomberg.net

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