New Zealand’s dollar fell for the first time in five days after a government report showed consumer spending unexpectedly declined, backing speculation the central bank will leave interest rates unchanged this week. The so-called kiwi dropped against all 16 of its major counterparts amid prospects growth in New Zealand will slow this quarter as the nation’s worst earthquake in 80 years reduces output. The Australian dollar retreated from its strongest level in five months versus the greenback as a technical indicator signaled its advance this month may have come too rapidly. “Consumers are still subdued and very conscious about their spending,” said Khoon Goh, Wellington-based head of market economics and strategy at ANZ National Bank Ltd. “The earthquake put paid to any near-term rate hikes,” weakening demand for New Zealand’s dollar. New Zealand’s dollar fell to 72.88 U.S. cents as of 2:43 p.m. in Sydney from 73.42 in New York yesterday. The currency dropped 1.2 percent to 60.74 yen. Australia’s currency slipped 0.3 percent to 93.30 U.S. cents after rising to 93.62 cents, matching the strongest since April 15. The currency weakened 0.7 percent to 77.76 yen. New Zealand’s retail sales fell 0.4 percent in July from the previous month, Statistics New Zealand said, citing seasonally adjusted figures. The median forecast in a Bloomberg News survey of economists was for sales to be unchanged. Benchmark interest rates are 4.5 percent in Australia and 3 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. Business Confidence Australia’s currency fell versus the dollar after the 14- day relative strength index for the Aussie yesterday approached the 70 threshold that indicates a currency has risen too rapidly and may be poised to fall. Declines were trimmed as a report showed business confidence jumped in August to the highest level in four months. A confidence index for the nation’s businesses rose to 11 points in August from 2 points the previous month, according to a National Australia Bank Ltd. survey of more than 530 companies from Aug. 24 to Aug. 31 that was released in Sydney today. The Aussie climbed 4.8 percent against the greenback this month as traders increased bets that central bank Governor Glenn Stevens will resume raising benchmark borrowing costs, according to a Credit Suisse AG index based on swaps. ‘Compelling’ Case “As the economy gathers speed in 2011, the case for rate rises will become more compelling,” said Alan Oster, chief economist at National Australia in Melbourne. The Reserve Bank of Australia will boost the benchmark rate by a quarter percentage point each quarter in 2011, bringing the rate to 5.5 percent by the end of next year, he said. There is also a risk the central bank may start raising rates as early as November, Oster said. Australian bond futures rose, with the 10-year contract for September delivery at 94.97 on the Sydney Futures Exchange from 94.935 yesterday. The implied yield on the futures fell 3.5 basis points to 5.03 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.87 percent from 3.90 yesterday. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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