By Candice Zachariahs and Ron Harui May 11 (Bloomberg) -- The Australian and New Zealand dollars fell for the first time in three days as demand for higher-yielding assets declined amid speculation a loan plan of almost $1 trillion won’t end the euro zone’s fiscal crisis. Demand for the currencies weakened against the dollar and yen after European Central Bank President Jean-Claude Trichet said yesterday the rescue package wasn’t supported by all 22 of its Governing Council members. Both currencies also declined after China said consumer prices rose at the fastest pace in 18 months and industrial output gained less than forecast. “The currency markets in general seem to be taking a less optimistic view of the bailout package,” said Ray Attrill, global research director at Forecast Ltd. in Sydney. “The Australian dollar is pretty vulnerable to any renewal of outright negative sentiment toward euro zone-related issues.” Australia’s dollar fell to 89.58 U.S. cents as of 4:34 p.m. in Sydney from 90.28 U.S. cents in New York yesterday. It slid 1.6 percent to 82.90 yen. New Zealand’s dollar dropped 0.7 percent to 71.77 cents and weakened 1.5 percent to 66.42 yen. Governments of the 16 nations using the euro agreed to lend as much as 750 billion euros ($959 billion) to the most-indebted countries. The European Central Bank said it will counter “severe tensions” in “certain” markets by purchasing government and private debt. Greece may have its credit rating lowered to junk within the next month, Moody’s Investors Service said yesterday, citing the country’s “dismal” economic prospects. ‘Difficult’ Balance China’s consumer prices rose 2.8 percent in April from a year earlier, compared to the 2.7 percent median prediction of economists surveyed by Bloomberg News. Producer prices jumped 6.8 percent, also topping estimates, today’s release from the statistics bureau showed. Industrial output for April advanced 17.8 percent, less than the 18.5 percent economist forecast. “You have the combination of stronger inflationary pressures and also some signs of softening in the data -- it’s difficult for China to get the balance right,” said Robert Rennie, head of currency research in Sydney at Westpac Banking Corp., Australia’s second-largest lender. A slowing economy in China “emphasizes that it will be harder for the Aussie to break through its highs.” Investors should buy the currency if it falls toward 87 U.S. cents and sell it on gains to 93 cents, Rennie said. China is Australia’s largest trading partner and New Zealand’s second-biggest export market. New Zealand Spending New Zealand’s consumer purchases on debit, credit and store cards declined for the second time in three months in April. The value of transactions on electronic cards fell 1.7 percent, Statistics New Zealand said today. Australian government bonds rose as investors bought the safest assets on concerns over Europe and before the South Pacific nation’s budget is released. It’s important to return the government’s budget to surplus “as soon as possible,” Treasurer Wayne Swan said speaking to reporters ahead of tonight’s federal budget. “There’s a bit of a risk that they surprise by announcing an earlier than expected surplus,” said Tony Morriss, senior markets strategist in Sydney at Australia & New Zealand Banking Group Ltd. The yield on 10-year notes fell nine basis points, or 0.09 percentage point, to 5.48 percent, according to data compiled by Bloomberg. The price of the 4.5 percent security due April 2020 gained 0.62, or A$6.20 per A$1,000 face amount, to 92.55. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 4.55 percent from 4.59 yesterday. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net

Source