By Candice Zachariahs Aug. 5 (Bloomberg) -- The Australian and New Zealand dollars fell from 10-month highs as Asian equities declined, adding to speculation recent gains by the currencies came too rapidly. The two currencies also weakened before reports tomorrow economists said will show Australia’s jobless rate climbed to the most in six years and New Zealand’s unemployment rate reached the highest since 2000. Australia’s dollar has advanced 2.4 percent since July 28 when Governor Glenn Stevens said the nation may not be in “one of the more serious” downturns of the post-World War II era. “We are starting to get toward elevated levels for the Australian dollar,” said John Horner, a currency strategist in Sydney at Deutsche Bank AG. “The market is going to be reticent to sell the Australian dollar,” before the central bank releases its monetary policy statement on Aug. 7, he said. Australia’s currency traded as high as 84.56 U.S. cents, near its highest since Sept. 22, before falling 0.3 percent to 84.22 cents as of 4:25 p.m. in Sydney from yesterday in New York. The currency declined 0.5 percent to 79.98 yen from 80.41 yen. New Zealand’s dollar rose as high as 67.51 U.S. cents, the most since Oct. 1, before trading 0.2 percent lower at 67.24 cents from 67.37 in New York. It bought 63.85 yen from 64.15 yen. The 14-day relative strength index for the Australian and New Zealand dollar’s climbed above 69 yesterday. A reading above 70 signals a change in direction may be imminent. The Australian dollar will fall toward 75 to 76 U.S. cents over the next three months, Horner said. ‘Buy Dips’ “The Australian and New Zealand dollars have moved rapidly and perhaps they deserve to pause,” said Greg Gibbs, a foreign- exchange strategist at Royal Bank of Scotland Group Plc in Sydney. “The emphasis at the moment is clearly a buy-dips mentality, so it’s too early to call the rally over.” Australia’s jobless rate climbed to 6 percent last month, the most since July 2003, according to a Bloomberg News survey of economists. New Zealand’s unemployment rate rose to 5.7 percent last quarter, a separate survey showed. “Both currencies will be stymied by unemployment tomorrow,” said Alex Sinton, a senior dealer at ANZ National Bank Ltd. in Auckland. The Australian dollar may fall 9 percent against the yen this month as Japanese mutual funds expect to raise less cash to buy foreign securities, RBC Capital Markets said. Weakening Against Yen Japanese funds that aim to attract cash from investors to buy foreign securities, also known as Toshin, are likely to raise 50 billion yen in August, down from 200 billion yen on average between March and July, wrote Sue Trinh, senior currency strategist at RBC Capital Markets, in a note to clients. Toshin issuance in February was 47 billion yen, she said. “The rally in the Australian dollar versus the yen from its March lows coincided with a resurgence in Toshin issuance,” Sydney-based Trinh said. “Based on the pitiful issuance we expect for August, it suggests the Australian dollar could pull back sharply from current levels” toward 73 yen, she wrote. Australia’s currency briefly pared declines after a report showed its trade deficit unexpectedly narrowed in June as exports increased. The trade shortfall shrank to A$441 million ($372 million) in June from a revised A$737 million in May, the statistics bureau said. The median estimate in a Bloomberg survey of economists was for a shortfall of A$800 million. The New Zealand dollar earlier climbed to the highest since October after Auckland-based Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, said whole-milk powder prices surged 26 percent from a five-year low as demand improved. Milk Prices Fonterra said prices of milk powder rose to an average $2,301 a metric ton across its three contracts at an auction yesterday. The gain was the first in three months and leaves prices 39 percent less than a year earlier, according to data on the company’s GlobalDairyTrade Web site. “New Zealand is fairly well driven by commodity exports, and a 26 percent increase in price from Fonterra shows solid underlying demand,” ANZ National’s Sinton said. “The New Zealand dollar took off like a rocket” after Fonterra’s announcement, he said. Australian government bonds fell for a third day. The yield on the benchmark 10-year notes rose one basis point to 5.66 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 declined 0.033, or A$0.33 per A$1,000 face amount, to 97.001. Australia sold A$500 million of notes maturing April 2015 today at a weighted average yield of 5.57 percent. The so-called bid-to-cover ratio at the auction was 4.1 times, compared with 2.1 at a June 10 auction of the same securities. Australian government bonds were little changed with the yield on the benchmark 10-year notes at 5.65 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 added 0.010, or A$0.10 per A$1,000 face amount, to 97.044. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 3.99 percent from 3.96 yesterday. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

Source