Australia Dollar Falls as Investors Sell Higher-Yielding Assets

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The Australian dollar fell as investors sold higher-yielding assets on concern that credit- market losses will slow global economic growth.

The currency declined for a third day as the rate Australian banks charge each other for loans rose to the highest in more than a decade, suggesting the cash injection by central banks won't be enough to revive lending. Credit-market turmoil has hurt the Australian dollar as investors became less inclined to buy the nation's stocks and bonds with money borrowed from Japan in so-called carry trades.

``There will be visible signs that financial market stresses will have real economic impact, so this will weigh on'' Australia's dollar, said David Mozina, senior currency strategist in New York at Lehman Brothers Holdings Inc., the fourth-biggest U.S. securities firm. ``We're negative on the Australian dollar at these sort of levels medium term.''

The Australian dollar declined to 87.77 U.S. cents as of 6 p.m. in Sydney, from 88.03 cents in late Asian trading yesterday. It traded at 87.80 a week ago in New York.

Caltex Australia Ltd., the nation's biggest oil refiner, cut its full-year profit forecast by as much as 13 percent because of a decline in the Australian dollar. The currency has slid 6.6 percent since touching a 23-year high of 94 cents on Nov. 8.

Central banks in the U.S., U.K., Canada, Switzerland and the euro region agreed on Dec. 12 to a coordinated effort to promote lending and restore confidence in money markets. Policy makers are reacting to more than $66 billion of losses tied to U.S. subprime mortgage defaults from banks this year.

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