SYDNEY/WELLINGTON: The Australian dollar lost about a third of a U.S. cent on Thursday after October retail sales unexpectedly fell, denting hopes for a strong economic revival in the fourth quarter. The Australian dollar was soft at $0.9637, after falling as far as $0.9621. It had traded at $0.9666 before the data. Support is at the 2-1/2-month low of $0.9536 hit on Wednesday. Data showed retail sales in October dropped 1.1 percent, the biggest fall in 15 months. That was far weaker than forecasts for a 0.3 percent rise, with some analysts saying the fall was in part due to higher interest rates. "We'll see more softer data until the end of the year. It goes hand in hand with the November rate hike. I think it's a case of a softer Aussie into the end of the year," said Robert Rennie, chief currency strategist at Westpac Bank. The Reserve Bank of Australia had raised rates by 25 basis points to 4.75 percent in November, as a pre-emptive strike against inflation. Given household consumption accounts for about 55 percent of Australia's economy, disappointing retail sales cast doubts over whether the economy could re-accelarate in the fourth quarter, although it did not alter rate hike bets. After the RBA's comments last week that investors were not unreasonable to expect the next rate hike to come in mid-2011, investors have been priced for no change in rates before June. That said, analysts noted the surprisingly big trade surplus in October showed Australia's booming commodities' sector should drive household incomes higher in coming months. That in turn should underpin consumption. Underscoring the Australian dollar's solid fundamentals, Rennie said the currency would be a good buy if it falls further to around 93 cents. NZ DOLLAR FIRM The New Zealand dollar fared better, holding its ground at $0.7510 to be steady from the local open, and about half a cent above late Wednesday levels. "After the gains of last night the kiwi didn't really add to that in our session, it just dribbled off in a consolidation pattern," said Westpac senior markets strategist Imre Speizer. After the solid bout of global data overnight lifted growth-sensitive currencies, consolidation was likely with the closely-watched U.S. payrolls report due on Friday. The kiwi was seen with a strong base at Tuesday's two-month low of $0.7398, while resistance started from $0.7540. The currency was also helped by a rise in international dairy prices, the country's key export commodity. The retreat in the Aussie pulled it down against the kiwi to NZ$1.2826 , from NZ$1.2901 seen here late Wednesday. NZ govt debt eased slightly after gains in the offshore session saw yields up as much as 6 basis points. Australian bond futures were lower, with the three-year contract down 0.01 point at 95.03, and 10-year futures off 0.035 points at 94.59.

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