Australia’s dollar fell for the first time in three days as an industry report showed consumer confidence dropped, raising speculation investors will sell higher-yielding assets. New Zealand’s currency weakened. The Australian and New Zealand dollars also weakened against the yen after a government report showed Japan’s economy shrank at the fastest pace since World War II, increasing demand for currencies perceived to be safer. The Australian dollar extended losses on speculation the currency’s advance to a seven-month high this week was overdone and the World Bank said enthusiasm about a recovery in China may be premature. “It’s a risk story as much as it’s the Westpac confidence numbers,” said Tony Morriss, a senior markets strategist at Australia & New Zealand Banking Group Ltd. in Sydney. “There may be further scope for a pull-back in the Australian dollar if stock markets weaken.” Australia’s currency fell 0.2 percent to 77.28 U.S. cents as of 2:14 p.m. in Sydney from yesterday in New York when it climbed to 77.84 cents, the strongest level since Oct. 3. The currency slid 0.5 percent to 73.96 yen. New Zealand’s dollar declined 0.1 percent to 60.14 U.S. cents and weakened to 0.3 percent to 57.58 yen. The Australian dollar may fall toward 76.70 U.S. cents today, Morriss said. Confidence Falls An index of Australian consumer sentiment dropped 4.3 percent to 88.8 points in May, according to a Westpac Banking Corp. and Melbourne Institute survey of 1,200 consumers. That was a 16th consecutive reading of less than 100, indicating pessimists outnumber optimists. Australia’s S&P/ASX 200 Index fell 0.4 percent and the MSCI Asia Pacific index of regional shares pared gains to 0.5 percent from as much as 0.7 percent. “Until we see a recovery in private investment, it’s hard to get too excited about the future,” David Dollar, the World Bank’s country director for China, said today at a forum in Beijing. Private investment was “way down” in the first quarter, he said, without citing a figure. Japan’s economy shrank at a record 15.2 percent annual pace last quarter as exports collapsed. Gross domestic product contracted 3.5 percent in the year ended March 31, the most since records began in 1955. Bond Sale Australia today sold A$699 million ($540 million) of bonds maturing in April 2020 at a weighted average yield of 5.22 percent. Investors submitted bids for three times the amount of securities on offer. Australian government bonds fell for a second day. The yield on the 10-year note climbed four basis points, or 0.04 percentage point, to 5.03 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 slipped 0.327, or A$3.27 per A$1,000 face amount, to 101.671. The rate Australian banks charge each other for three-month loans rose 1.5 basis points to 3.135 percent at today’s fixing, Australian Financial Markets Association data show. The difference between that rate and the overnight swap rate was 22 basis points. The spread, a measure of cash scarcity, averaged 11 basis points in the five years before the credit crunch started in August 2007. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was little changed at 3.46 percent.

Source