The Australian dollar fell below parity with the greenback after Reserve Bank Governor Glenn Stevens said financial conditions are on the “firm side” and the bank judged it “sensible of late” to leave interest rates unchanged. New Zealand’s currency declined as the nation’s bond yield premium compared with the U.S. narrowed amid signs of recovery by the world’s largest economy. The South Pacific currencies also dropped as Egyptian President Hosni Mubarak handed power over to the military, raising questions about who will control the country. “Stevens is leaning toward the dovish side and that saw the Aussie drop with his comments taking a rate hike out of the immediate picture,” said Tim Waterer, a foreign exchange dealer with CMC Markets in Sydney. “There’s continued uncertainty about the transition of power in Egypt and any uncertainty the market won’t react well to, which is why we’re seeing risk assets fall.” Australia’s currency declined 0.5 percent to 99.99 U.S. cents at 12:59 p.m. in New York from $1.0044 yesterday. The currency headed for a 1.3 percent decline this week. It touched 99.80 cents, the weakest since Feb. 1. It fetched 83.52 yen from 83.58 yen. New Zealand’s dollar slid to 75.91 U.S. cents from 76.44 cents yesterday. The kiwi touched 75.54 cents, the least since Jan. 24. It fell 0.4 percent to 63.40 yen. Yield Spreads New Zealand’s three-year debt offered 248 basis points more yield than similar maturity U.S. bonds, down from 264 basis points on Feb. 4. A basis point is 0.01 percentage point. “Overall, financial conditions are on the firm side,” Stevens told a parliamentary committee today in Canberra. “In view of the general outlook that I sketched at the beginning, that seems to us to be appropriate. Having reached that position in a fairly timely fashion, the Board has judged it to be sensible of late to leave the cash rate steady.” Swaps traders are betting the Reserve Bank of Australia will raise its benchmark rate by 35 basis points during 12 months, down from 41 basis points yesterday, according to a Credit Suisse AG index. Australia’s currency will trade at 98 U.S. cents by the end of the year, according to the median forecast of banks surveyed by Bloomberg News. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net To contact the editor responsible for this story: Nicholas Reynolds at nreynolds2@bloomberg.net

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