By Ron Harui and Sarah McDonald Nov. 20 (Bloomberg) -- The Australian and New Zealand dollars headed for their first weekly loss against the U.S. currency this month on speculation a slowing global recovery will deter policy makers from increasing interest rates. The Australian and New Zealand dollars were also set for their first weekly declines versus the yen in three weeks as Asian equities extended a global slump, sapping demand for higher-yielding assets. U.S. reports this week showed homebuilding in the world’s largest economy unexpectedly dropped in October and signaled inflation will be of little concern for the Federal Reserve. “Reduced risk appetite and the more cautious mood across global equity markets are expected to limit gains in growth- sensitive currencies like the Australian and New Zealand dollars,” said Mike Jones, a currency strategist at Bank Of New Zealand Ltd. in Wellington. Australia’s dollar traded at 92.00 U.S. cents as of 4:49 p.m. in Sydney from 91.86 cents in New York yesterday, when it dropped to 91.32 cents, the lowest level since Nov. 6. It has lost 1.4 percent this week. The currency was at 81.78 yen from 81.72 yen yesterday, when it declined to 81.08 yen, the weakest level since Nov. 4. New Zealand’s dollar bought 73.08 U.S. cents from 73.11 cents, and was at 64.96 yen from 65.04 yen. Shares Fall Australia’s currency weakened earlier as the MSCI Asia Pacific Index of regional shares fell as much as 1.1 percent. The so-called Aussie-yen had a correlation of 0.92 with the index in the past year, according to data compiled by Bloomberg. A reading of 1 would mean the two moved in lockstep. U.S. builders broke ground on 529,000 houses at an annual pace in October, down 11 percent from the prior month and the fewest since April’s record low, Commerce Department figures showed Nov. 18. Consumer prices were down 0.2 percent from the same time last year, Labor Department data showed on Nov. 18. “Reduced global risk appetite and a broad-based strengthening in the U.S. dollar has knocked some of the wind out of the Australian dollar,” National Australia Bank Ltd. analysts said in a note to clients today. “An ongoing reassessment of the pace of expected tightening from the RBA has also weighed on the Australian dollar over the past few days.” Australia’s currency has risen 51 percent in the past 12 months against the greenback as the Reserve Bank of Australia became the first policy makers to increase borrowing costs twice this year. The chance of an RBA interest-rate increase in December stood at 64 percent today, down from 83 percent odds a week earlier, according to a Credit Suisse Group AG index based on swaps trading. Benchmark Rates Benchmark interest rates are 3.5 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. Losses in the Australian dollar were tempered against the yen amid speculation Japanese investors will buy overseas assets in search of higher returns. “It’s possible we’ll see Japanese demand for mutual funds,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “Currencies such as the Brazilian real, South African rand as well as the Aussie are quite popular.” Finance companies in Japan are looking to raise 300 billion yen ($3.4 billion) for mutual funds focused on foreign assets today, according to data compiled by Bloomberg. Japanese investors bought 759.7 billion yen more overseas bonds and notes than they sold during the week ended Nov. 13, figures from the Finance Ministry showed in Tokyo yesterday. Australian government bonds rose. The yield on the 10-year note fell five basis points, or 0.05 percentage point, to 5.41 percent, and touched the lowest since Oct. 14, according to data compiled by Bloomberg. The price of the 5.25 percent security due in March 2019 climbed 0.333, or A$3.33 per A$1,000 face amount, to 98.891. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, which is sensitive to interest-rate expectations, rose two basis points to 4.34 percent. To contact the reporters on this story: Ron Harui in Singapore at rharui@bloomberg.net; Sarah McDonald in Sydney at smcdonald23@bloomberg.net.

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