Aussie dollar slips to lowest in 4 years on commodity rout

SYDNEY (Reuters) - The Australian dollar stumbled to a fresh 4-year low on Friday and the New Zealand dollar remained near its weakest in two years, weighed by declining commodity prices and a strong U.S. dollar.

The Australian dollar fell to a low of US$0.8547, its weakest since July 2010 and a long way from the week's top at US$0.8763. It was last at US$0.8555 to show a loss of 2.5 per cent for the week, its largest decline in two months.

In its quarterly monetary policy report, the Reserve Bank of Australia (RBA) highlighted the high local dollar as a key source of uncertainty as the central bank forecast sub par economic growth at home.

The Aussie has dropped 4 per cent this year, yet the RBA said it was still above most estimates of fundamental value, particularly in the face of big falls in key commodity prices.

Prices for iron ore, Australia's top export earner, slipped to its lowest in five years at US$75.60 a tonne.

Yet the RBA's hopes for a lower currency could be thwarted by the easing policies of other central bank. It noted that the Bank of Japan's plan to expand its already massive stimulus programme could keep the Aussie above fundamental values.

Still, the omens favoured further falls against the U.S. dollar. "The Aussie is heading south because the U.S. economy is getting stronger, China continues to slow down and Australia's growth outlook is below trend," said Greg Gibbs, a strategist at Royal Bank of Scotland in Singapore.

In the short-term, Gibbs said the Aussie could break below the psychological level of 85 US cents should U.S. nonfarm payrolls deliver a strong outcome later in the session.

The New Zealand dollar fell to US$0.7689, closing in on a 2-1/2-year low of US$0.7868 touched on Thursday. It has shed 1.4 per cent this week.