By Candice Zachariahs April 16 (Bloomberg) -- The Australian and New Zealand dollars fell for a second day against the yen on concern China’s government will take more measures to slow its economy, damping demand for commodity-linked currencies. The so-called kiwi is set to be the second worst-performer this week against Japan’s currency on signs subdued consumer spending will convince the Reserve Bank of New Zealand to keep interest rates at record lows. Declines in Australia’s dollar may be limited before the release next week of minutes from the Reserve Bank of Australia’s April meeting when officials raised the benchmark rate to 4.25 percent. “Chinese policy makers know they have to bring out the big guns, which is currency revaluation and official hikes to interest rates,” said Khoon Goh, a senior economist at ANZ National Bank Ltd. in Wellington. “In the short-term this will be negative for Aussie and kiwi. Any move to rein in growth in China will have an impact on demand for commodities and therefore commodity prices.” Australia’s currency fell to 86.28 yen as of 2:40 p.m. in Sydney from 86.94 yen in New York yesterday, when it declined 0.3 percent. It weakened 0.5 percent to 92.97 U.S. cents and is set for its first weekly loss this month. New Zealand’s dollar dropped 0.4 percent to 65.98 yen and traded at 71.11 U.S. cents from 71.19 cents yesterday. It has weakened 1.1 percent against the yen and 0.7 percent versus the greenback this week. China’s Shanghai Composite Index dropped 0.8 percent, set for a second weekly decline. The MSCI Asia Pacific Index ended two days of gains falling 0.9 percent. China’s Growth China’s economy grew 11.9 percent in the first quarter from a year earlier, the biggest gain since the second quarter of 2007, the statistics bureau said in Beijing yesterday. Within hours of the data, the government announced measures to cool the real-estate market. New Zealand’s currency has fallen against 15 of the 16 most-active currencies this week after a government report on April 14 showed retail sales unexpectedly fell in February for the second time in three months. Benchmark interest rates are 4.25 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. Swaps traders have reduced their expectation for rate increases from the Reserve Bank of New Zealand to 1.64 percentage points over 12 months, from 1.75 points at the end of March, a Credit Suisse AG index shows. ‘Ongoing Caution’ “The data flow urges ongoing caution,” said Goh, who said the bank may announce its first increase in September. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 4.20 percent from 4.22 yesterday. Australian government bonds rose. The yield on 10-year notes fell four basis point, or 0.04 percentage point, to 5.82 percent, according to data compiled by Bloomberg. The price of the 4.5 percent security due April 2020 gained 0.27, or A$2.70 per A$1,000 face amount, to 90.11. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net.

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