The Australian and New Zealand dollars fell from eight-month highs as traders speculated their advances may have been too rapid after the currencies rose last month by the most in 24 years. The Australian dollar pared declines after the statistics bureau said the current-account deficit narrowed in the first quarter by more than economists estimated. The currency soared by a record over the past three months and its central bank is forecast to keep interest rates at the highest among industrialized economies when it meets today in Sydney. “We’ve had exhaustive moves on the topside and we need to have some sort of correction back,” said Alex Sinton, a senior currency dealer at ANZ National Bank Ltd. in Auckland. “Any selling of the Australian and New Zealand dollars will not be as fierce when people look at their relative GDP performances compared to Japan, the U.S. and the euro region.” Australia’s currency fell 0.2 percent to 80.86 U.S. cents as of 12:13 p.m. in Sydney after rising yesterday to as much as 81.53 cents, the most since Sept. 29. The currency dropped 0.4 percent to 77.93 yen, after trading yesterday at the strongest since Oct. 6. New Zealand’s dollar slipped 0.5 percent to 64.68 U.S. cents after touching 65.65 cents yesterday in New York, the most since Oct. 6. It bought 62.33 yen from 62.79 yen and as much as 63.32 yen, the most since Oct. 21. The 14-day relative strength indexes for the Australian and New Zealand dollars against the U.S. currency exceeded 70 for a third day, suggesting a change in direction may be imminent. Current Account, Building The current-account shortfall shrank to A$4.61 billion ($3.7 billion), the Bureau of Statistics said in Sydney today, compared with the median estimate in a Bloomberg News survey of 18 economists for an A$5.43 billion gap. Building approvals rose in April for a third month as government handouts and record-low borrowing costs boosted demand. The number of permits granted to build or renovate houses and apartments increased 5.1 percent from March, compared with economists’ forecast for a 2 percent advance. Benchmark interest rates are 3 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’ assets. The risk in such trades is that currency market moves will erase profits. Trades that involve buying Australian assets using yen-, or U.S. dollar-denominated funds offered the third-best returns this year among the 16 most-active currencies, lagging behind the Brazilian real and the South African rand, Bloomberg data show. Economy Shrinking Australia’s dollar may weaken before a separate statistics bureau report tomorrow that economists said will likely show the economy shrank 0.2 percent in the first quarter, its second consecutive contraction, according to a Bloomberg News survey. The report “has the potential to surprise severely to the downside,” wrote strategists lead Hans-Guenter Redeker, global head of foreign-exchange strategy in London at BNP Paribas SA, in a note to clients yesterday. The Australian dollar will find buyers toward 80.50 U.S. cents and New Zealand’s near 64.65 cents today, Sinton said. The currencies may slip towards 77.85 yen and 61.50 yen, respectively, he said. Stock Rally The Australian and New Zealand dollars surged in New York yesterday to the strongest this year as investors bought the two nations’ assets amid a global rally in equities and commodities. The Standard & Poor’s 500 Index climbed to a seven-month high after reports on personal income, manufacturing and construction beat economists’ forecasts. Copper rose to seven- month highs also with a gauge of commodity prices advancing the most since April 2. Commodity exports are important to the South Pacific nations’ currencies as raw materials account for 60 percent of Australia’s exports and 70 percent of New Zealand’s. National Australia Bank Ltd. recommended yesterday that investors buy the Australian dollar if it dips below 76 yen, targeting an advance to 80 yen over the coming months. Australian government bonds declined for a second day. The yield on 10-year notes added 11 basis points, or 0.11 percentage point, to 5.47 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 slipped 0.80, or A$8 per A$1,000 face amount, to 98.36. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 3.59 percent from 3.55 percent yesterday.

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