The Australian dollar fell from a seven-month high versus the greenback as reports suggesting U.S. lenders will be required to raise new capital sapped demand for higher-yielding assets. New Zealand’s dollar also slid. The currencies declined after Reuters reported that government stress tests would show Bank of America Corp. may need as much as $34 billion in additional capital. The Australian dollar strengthened in each of the last nine weeks on speculation a global financial crisis was easing. “The Bank of America headline has hurt equity futures, cross-yen and risk currencies,” said Phil Burke, chief foreign- exchange dealer at JPMorgan Chase Bank in Sydney. “The market has been a little long risk and risk currencies and that’s why it’s being weighed down.” Australia’s currency slumped 0.9 percent to 73.62 U.S. cents as of 1:03 p.m. in Sydney from 74.26 cents in New York yesterday, when it touched 74.79 cents, the strongest since Oct. 6. The currency declined 1.5 percent to 72.30 yen. New Zealand’s dollar weakened 0.6 percent to 57.68 U.S. cents from 58.04 cents yesterday, when it touched 58.65 cents, the highest since April 14. It bought 56.67 yen from 57.34 yen. Bank of America has the largest need for new capital among the 19 biggest U.S. banks subjected to stress tests, people familiar with the matter said. Citigroup Inc.’s shortfall is more limited, while JPMorgan Chase & Co. doesn’t need a deeper reserve against potential losses over the coming two years. The Australian dollar will find buyers towards the low 73- cent region, while New Zealand’s currency may fall towards 57.20 cents, Burke said. ‘Uphill Battle’ “What really is concerning us today in currency markets is the stress tests and the resulting uphill battle U.S. banks will face to raise funds,” said Robert Rennie, chief currency strategist at Westpac Banking Corp. in Sydney. “That hurts the Australian dollar by undercutting risk appetite.” The South Pacific nations’ currencies also declined after the International Monetary Fund said growth in Asia including Japan, Australia and New Zealand will probably slow to 1.3 percent this year, from 5.1 percent in 2008. The economies may expand 4.3 percent in 2010, even as the recovery is expected to be “tepid,” the fund said. New Zealand’s currency fell for the first day in four as its Treasury Department said the cash budget deficit was wider than the government forecast in March and would continue until at least June. Rising Unemployment A report tomorrow is forecast to show that New Zealand’s jobless rate climbed to 5.3 percent in the first quarter, the most since September 2002, according to the median estimate in a Bloomberg News survey of economists. A report in Australia the same day will likely show the unemployment rate there rose last month to 5.9 percent, the most since July 2003. “The Australian dollar looks like it’s at the top of the range and won’t break much above 75 U.S. cents in the short- term,” said Tony Allen, head of currency trading at ANZ National Bank Ltd. in Wellington. The Australian currency briefly rebounded after retail sales rose four times as much as economists forecasts in March and the nation’s trade surplus unexpectedly widened for a third month as imports fell and farm exports rose. ‘Short Reprieve’ Retail sales climbed 2.2 percent from February, against economists expectations for a 0.5 percent gain, the Bureau of Statistics said today. The trade surplus expanded to A$2.5 billion ($1.8 billion) from a revised A$1.75 billion in February, the bureau said. The median estimate of 19 economists surveyed by Bloomberg was for A$1.7 billion. “The Aussie had a short reprieve on domestic data, but really the market is going to focus on the stress tests later this week,” said Burke. Australia today sold A$700 million ($517.4 million) of securities maturing April 2020 at a weighted average yield of 5 percent. The so-called bid-to-cover ratio at the auction was 3.2. Australian government bonds advanced for the first day in six. The yield on 10-year notes fell four basis point, or 0.04 percentage point, to 4.78 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 rose 0.27, or A$2.70 per A$1,000 face amount, to 103.65. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 3.49 percent from 3.45 yesterday.

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