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Aussie, Kiwi Fall Versus Peers as Stock Drop Spurs Risk Aversion

The Australian and New Zealand dollars fell against most major peers as declines in global stocks reduced investor appetite for higher-yielding assets.

The Aussie weakened for a third day in four against the U.S. dollar after reaching a three-month high last week. New Zealand’s dollar headed for its biggest drop this month against the greenback after touching the highest level in four months last week. The kiwi retreated from near a five-year high versus its Australian counterpart as traders adjusted bets on a divergence in interest rates at the nations’ central banks.

“The equity markets opened on a softer foot, and we’re seeing a bit of weakness in the Aussie dollar as some risk comes off the table,” said Jim Vrondas, the Sydney-based chief currency and payment strategist at OzForex Ltd. “I don’t expect it to have a long-lasting effect.”

The Australian dollar slid 0.2 percent to 94.13 U.S. cents as of 5 p.m. in Sydney from yesterday, when it rose 0.4 percent. New Zealand’s dollar dropped 0.5 percent to 83.29 U.S. cents.

The MSCI Asia Pacific Index of stocks fell 0.6 percent, following a 0.5 percent drop in the Standard and Poor’s 500 Index yesterday.

The Aussie has climbed 2.4 percent in the past month, the best performance after the New Zealand dollar’s 5.2 percent appreciation among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes.

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Australia’s dollar touched 95.29 U.S. cents on Sept. 18, a level unseen since June 19. New Zealand’s dollar reached 84.36 U.S. cents on Sept. 19, the highest level since May 9.

The Australian currency may rise to 97 U.S. cents, according to Credit Suisse Group AG technical analysts David Sneddon and Christopher Hine. An initial move above 94.59 is “key” to testing the 38 percent retracement of the decline between April and August at about 95.11, they wrote in a research note to clients dated today.

The kiwi retreated from the strongest level in almost five years against Australia’s currency as traders adjusted bets for central bank interest rates.

Traders see an 80 percent chance the Reserve Bank of New Zealand will raise borrowing costs from a record-low 2.5 percent by April next year, down from 96 percent odds yesterday, interest-rate swaps data compiled by Bloomberg show. They see a 49 percent probability the Reserve Bank of Australia will reduce its cash target rate from a record low of 2.5 percent in the same period.

New Zealand’s dollar fell 0.4 percent to NZ$1.1301 per Aussie dollar, after touching NZ$1.12 on Aug. 1, the strongest since October 2008.

“Diverging expectations has helped the cross come up to these levels,” said Alex Sinton, the director for institutional foreign exchange in Auckland at Australia & New Zealand Banking Group Ltd. “The NZ$1.12 zone in recent times has presented some difficulty, and we really need some new news to break that.”

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