June 29 (Bloomberg) -- The Australian and New Zealand dollars fell for the first time in five days after China said the U.S. currency’s may continue to dominate foreign-exchange markets, boosting demand for the greenback. The Australian and New Zealand currencies extended declines after Japanese reports showed industrial output rose less than economists expected in May and retail sales declined. The U.S. dollar gained against 15 of the 16 major currencies after Guan Tao, deputy head of the international payment department at the State Administration of Foreign Exchange, said the currency’s role is supported by the U.S.’s “super-strong comprehensive national power,” in an article in Chinamoney Magazine. “There isn’t a realistic alternative to the U.S. dollar at the moment,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia, the nation’s biggest mortgage lender. The Australian dollar “won’t get below 79 cents this week, with a fair bit of support around the high 78- cent level,” he said. Australia’s currency fell 1.2 percent to 79.87 U.S. cents as of 4:35 p.m. in Sydney from 80.79 cents in New York last week. The currency declined 0.9 percent to 76.20 yen. New Zealand’s dollar declined 0.5 percent to 64.24 U.S. cents and was 0.2 percent lower at 61.32 yen. New Zealand’s currency may fall toward 63.50 cents this week, Capurso said. Japan’s industrial production climbed 5.9 percent from a month earlier, the Trade Ministry said, less than the 7 percent gain forecast in a Bloomberg News survey of economists. Retail sales dropped 2.8 percent from a year earlier, a separate report showed. Japan is Australia’s second-biggest export market following China. China Holdings Guan’s article came after China’s central bank Governor Zhou Xiaochuan told reporters in Basel, Switzerland, yesterday that the nation’s “foreign exchange reserve policy is always quite stable.” China holds the world’s largest pool of foreign-exchange reserves at $1.95 trillion and the U.S. dollar fell the most in a month on June 26 after the People’s Bank of China renewed a call for the creation of a new global currency. “The Chinese really have nowhere to go,” Boris Schlossberg, director of currency research at GFT Forex, said in an interview on Bloomberg Television. “They will very much remain dollar-denominated for quite a long time.” ‘Dangerous Trade’ The Australian and New Zealand dollars “could be a dangerous trade, buying at this level” if equity markets drop or Chinese data disappoint investors, Schlossberg said. Australia’s dollar is set for record gains this quarter, rising 16 percent. New Zealand’s currency has climbed the most since a 16.6 percent advance in the third quarter of 1985 as investors bought the two nations’ assets for their higher yields and on bets the worst of the global recession is over. Asian stocks fell for the first day in four, declining 1.1 percent, and futures indexes signaled U.S. equities may also open lower. New Zealand’s currency pared today’s losses after a government report showed the trade deficit was the narrowest in more than five years in May. The shortfall shrank to NZ$3.04 billion ($1.96 billion) in the 12 months ended May 31, from NZ$4.07 billion in the year through April. “The numbers don’t look too bad so it’s a modest positive for the currency,” said Alex Sinton, a senior dealer at ANZ National Bank Ltd. in Auckland. The Australian and New Zealand dollars will be driven by “U.S. dollar sentiment,” he said. Hedge Funds Futures traders reduced bets the Australian dollar will gain against the U.S. currency, 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 an advance in the Australian dollar compared with those on a drop -- so-called net longs -- was 29,368 on June 23, compared with net longs of 32,203 a week ago. Australia’s New South Wales Treasury Corp. plans to sell at least A$500 million of bonds due May 2023, the funding arm for the nation’s most-populous state said today. UBS AG, RBC Capital Markets and Westpac Banking Corp. will manage the sale, an e- mailed statement said. Australian government bonds rose for a second day. The yield on the benchmark 10-year note declined nine basis points, or 0.09 percentage point, to 5.49 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security maturing March 2019 rose 0.625, or A$6.25 per A$1,000 face amount, to 98.19. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.79 percent from 3.84 percent last week.

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