By Candice Zachariahs Jan. 29 (Bloomberg) -- The Australian and New Zealand dollars headed for their third weekly decline against the yen, as concerns over slowing global economic growth damped demand for the two nations’ higher-yielding assets. The so-called kiwi was set for a second week of losses versus the dollar after permits to build homes in New Zealand fell for the first time in six months in December. Both currencies have weakened this month against the yen and greenback, with global equities set to end two months of gains in January, amid concern China’s efforts to curb loan growth and Greece’s fiscal woes will hamper the economic recovery. “Whenever there’s fear in the market, currency traders will tend to rush for the yen,” said Imre Speizer, a market strategist at Westpac Banking Corp. in Wellington. “U.S. equities are looking under a cloud at the moment and that augurs poorly for the Australian and New Zealand dollars.” Australia’s currency traded at 80.43 yen as of 2:40 p.m. in Sydney from 80.44 yen in New York and 80.91 on Jan. 22. It declined 0.1 percent to 89.36 U.S. cents, set for a 0.8 percent decline this week. New Zealand’s dollar bought 63.45 yen from 63.39 yen in New York yesterday and headed for a 0.5 percent weekly decline. The kiwi dollar bought 70.53 U.S. cents from 70.97 cents on Jan. 22. For the month against the yen, the Aussie has dropped 3.7 percent and New Zealand’s dollar has weakened 5.6 percent. Australia’s dollar will find support near 80 yen and New Zealand’s currency will be bought toward 63 yen, Speizer said. New Zealand’s dollar has slumped against the yen this month after a report Jan. 20 showed fourth-quarter consumer prices fell. Reserve Bank of New Zealand Governor Alan Bollard yesterday said rates will likely stay at a record low until the middle of the year. Tax Reform Government spending cuts and tax reforms would ease pressure on the central bank to raise rates, Bollard said in a speech in Christchurch today. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates which is sensitive to interest rate expectations, fell to 4.40 percent from 4.44 percent last week. New Zealand’s home-building approvals declined 2.4 percent in December from November when they rose a revised 0.1 percent, Statistics New Zealand said today, citing seasonally adjusted figures. Excluding apartments, approvals fell 1.4 percent. Declines in Australia’s dollar were limited before the Reserve Bank of Australia meets on Feb. 2. Policy makers will raise the target cash rate by 25 basis points at the gathering, according to 21 economists in a Bloomberg News survey. Investors should buy the Australian dollar versus the Swiss franc to “capitalize upon likely RBA hawkishness,” New York- based Todd Elmer and London-based Michael Hart, currency strategists at Citigroup Inc., wrote in a note in clients yesterday. The bank recommends buying the Aussie at 0.9415 franc, targeting a rise to 1 franc. Investors should “reassess” the trade if the Australian dollar falls below 0.92 franc, Citigroup said. The franc traded at 0.9395 per Australian dollar. Global Rates Australian bank lending rose in December by the most in 11 months. Loans provided by banks and other finance companies increased 0.3 percent from November, when they rose 0.1 percent, the Reserve Bank of Australia said. The median estimate of economists was for a 0.1 percent gain. Benchmark interest rates are 3.75 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. The risk in such trades is that currency market moves will erase profits. Australian government bonds rose. The yield on 10-year notes fell eight basis points, or 0.08 percentage point, to 5.39 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 gained 0.54, or A$5.40 per A$1,000 face amount, to 99.02. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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