World Crisis Online

By Monami Yui

March 4 (Bloomberg) — Australia’s dollar dropped for the week versus its U.S. counterpart after two consecutive five-day gains as signs of a recovery in the U.S. labor market reduced the yield advantage of the South Pacific nation’s bonds over Treasuries.

“It will keep the Aussie from breaking higher at this stage,” said Greg Gibbs, a strategist at Royal Bank of Scotland Group Plc in Sydney.

The Aussie slid versus the euro to the lowest level since January on prospects the European Central Bank will raise interest rates faster than the Reserve Bank of Australia over the next year. New Zealand’s dollar had the biggest weekly loss in two months against the greenback as the International Monetary Fund said it will likely cut the nation’s growth forecast.

Australia’s currency fell 0.6 percent for the week and 0.3 percent today to $1.0117 at 1:04 p.m. in New York. The Aussie dropped 0.4 percent today to A$1.3818 per euro and earlier touched A$1.3851, the weakest level since Jan. 28. It slid 0.5 percent to 83.24 yen, from 83.65 yesterday.

New Zealand’s dollar fell 1.9 percent for the week, the most since the five days ended Jan. 7, and 0.5 percent today to 73.71 U.S. cents. It touched 73.39 cents today, the lowest level since Oct. 1. The currency depreciated 0.7 percent to 60.69 yen, from 61.09 yesterday.

Employers in the U.S. added 192,000 workers in February, Labor Department Figures showed today in Washington, the most since May. The unemployment rate unexpectedly declined to 8.9 percent, the lowest level since April 2009.

Yield Gap

The difference in yields between Australian and U.S. 10- ytear government notes touched 1.97 percentage points yesterday, the narrowest since May. That compared with a gap of 2.12 percentage points a week ago.

The Australian dollar tumbled yesterday against the euro by the most in three weeks after European Central Bank President Jean-Claude Trichet said an “increase of interest rates in the next meeting is possible.” It closed at A$1.3769 per euro, down 1 percent.

New Zealand’s dollar weakened versus most of its major peers after the IMF said it will “likely” cut its New Zealand growth forecast from the current 3 percent as a result of two earthquakes there. IMF spokeswoman Caroline Atkinson spoke to a news conference in Washington yesterday.

–With assistance from Alexandra Harris in New York. Editors: Greg Storey, Paul Cox