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New Zealand, Australian Dollars Tumble on Europe Debt Concern

The New Zealand and Australian currencies declined for a second day as concern Europe will struggle to contain its sovereign-debt crisis sapped demand for riskier assets.

The so-called kiwi fell to a more than one month low against the dollar and yen. Losses in Australia’s dollar were limited after the Reserve Bank said in minutes of its Nov. 1 meeting there was a case for keeping interest rates unchanged.

“Aussie and kiwi remain vulnerable to the downside,” said Thomas Averill, a director at the currency and interest-rate risk management company Rochford Capital in Sydney. “The market is still very skeptical that the European problem can be solved any time soon. Skepticism within the European bond market followed through into general risk aversion.”

New Zealand’s dollar dropped 1.2 percent to 77.08 U.S. cents, after earlier falling to as low as 76.71 U.S. cents, the weakest since Oct. 10. It fell 1.3 percent to 59.38 yen after touching 59.04.

The Australian dollar declined 0.2 percent to $1.0181 and slid 0.3 percent to 78.43 yen. The Aussie rose 1 percent to NZ$1.3210, after earlier reaching NZ$1.3226, the highest since May.

Italy’s borrowing costs rose to a euro-era record at an auction of five-year notes yesterday. The yield was 6.29 percent, up from 5.32 percent at the previous auction and the highest since June 1997.

“The Italian bond auction was very disappointing,” said Rochford’s Averill. “Investor confidence is suffering because of the political situation and the sovereign credit situation.”

Australia’s currency was supported after the central bank said in minutes released today of its most recent policy meeting that there had been a case for keeping borrowing costs unchanged to await the expansionary effects of high commodity prices and the resource investment boom. Policy makers cut the cash-rate target by 0.25 percentage point to 4.5 percent at the Nov. 1 meeting.

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