The Australian and New Zealand dollars fell, retreating from one-month highs touched late last week, amid concerns the nations’ deteriorating economies may spur their central banks to lower interest rates to records. New Zealand’s manufacturing sales excluding inflation fell 5.4 percent in the fourth quarter, the statistics department said. The Reserve Bank of Australia tomorrow releases minutes of the March 3 board meeting, where policy makers halted reductions in borrowing costs. Since that meeting, government reports showed gross domestic product shrank for the first time in eight years and the unemployment rate climbed to a four-year high. “The RBA’s minutes moved markets on quite a few occasions so traders are a bit uneasy ahead of that, especially as the meeting was prior to the weak GDP and jobs data,” said Sean Callow, a senior currency strategist at Westpac Banking Corp., Australia’s biggest lender by market value. “New Zealand’s manufacturing sales today also puts downside risks to GDP forecasts for RBNZ.” Australia’s currency fell 0.3 percent to 65.64 U.S. cents as of 11:58 a.m. in Sydney from 65.82 cents in New York late last week, when it touched 66.04 cents, the strongest since Feb. 13. The currency retreated 0.2 percent to 64.57 yen. Rate Cut Chances The Aussie, as the currency is often known, will trade between 65.15 to 66.20 cents to the U.S. dollar today, Callow said, adding that markets are pricing in an 80 percent chance the RBA will lower rates next month by 0.5 percentage point to 2.75 percent and a 20 percent chance for a reduction to 3 percent. New Zealand’s dollar weakened 0.3 percent to 52.36 U.S. cents from 52.49 cents in New York on March 13, when it peaked at 52.69 cents, also the highest since Feb. 13. It bought 51.54 yen from 51.46. The kiwi, as the currency is commonly called, is likely to trade between 51.40 to 53.00 cents to the dollar today, Westpac’s Callow said. Australian policy makers on March 3 left the benchmark interest rate unchanged for the first time in seven months, saying the lowest borrowing costs in four decades and government spending were supporting the economy. Australian Dollar Shorts “It’s come off a little before the RBA minutes as that will give indications on their thinking and that may add to speculation of a rate cut as early as next month,” said Besa Deda, chief economist at St. George Bank Ltd. in Sydney, said about the Australian currency. Futures traders increased their bets that the Australian dollar will decline against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on a fall in the Australian dollar compared with those on a gain -- so-called net shorts -- was 3,945 on March 10, compared with net shorts of 2,786 a week earlier. Futures are agreements to buy or sell assets at a set price and date. The figures reflect holdings in currency-futures contracts at the Chicago Mercantile Exchange as of Tuesday. The euro fell versus the dollar, ending four days of gains, on speculation European nations will fail to increase spending enough to counter the financial turmoil in the region, spurring concerns of renewed risk aversion. The 16-nation currency declined against 11 of the 16 major currencies after European officials at the weekend Group of 20 finance ministers meeting said they had spent sufficient money to combat the financial crisis and didn’t want to blow out their budgets. Manufacturing Sales Slump New Zealand manufacturing sales excluding inflation fell 5.4 percent in the fourth quarter, led by the meat, dairy and fuel industries, Statistics New Zealand said today. Sales were unchanged from the third quarter after prices changes are included, the agency said. New Zealand’s services industry contracted for an 11th straight month in February as sales slow and companies curb costs by not renewing contracts, crimping demand for business services, Bank of New Zealand Ltd. and Business New Zealand, a Wellington-based employer group, said in a statement today. Australia’s dollar will probably stay above 65.2 U.S. cents and may push above 66 cents for a short while, St. George’s Deda said. The New Zealand currency may lag behind Australia’s as the economy is in worse shape, Deda said. The so-called kiwi may weaken toward NZ$1.30 against the Australian dollar in coming months. It may trade between 52 and 52.7 U.S. cents today. Australian government bonds fell for the second day. The yield on benchmark 10-year notes rose one basis point, or 0.01 percentage point, to 4.29 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 fell to 107.75. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.34 percent from 3.44 percent on March 13. The spread between that rate and Australia’s two- year swap rate was 19.3 basis points.

Source