By Candice Zachariahs March 31 (Bloomberg) -- The Australian dollar fell for the first day in three after retail sales and home-building approvals unexpectedly declined in February, easing pressure on the central bank to raise the benchmark interest rate next week. New Zealand’s currency gained a third day against the yen to its strongest in two months on speculation investors will seek higher-yielding asset amid a recovering global economy. Australian retail sales fell 1.4 percent in February, the Bureau of Statistics said in Sydney, compared with the median forecast of 19 economists for a 0.3 percent increase. “That was a very awful set of retail sales numbers with broad-based losses,” said Sue Trinh, a senior currency strategist at RBC Capital Markets in Hong Kong. “Aussie has collapsed on the number and I’d expect that to continue given that a large factor causing the Aussie’s outperformance in the past week has been expectations of a rate hike next week.” Australia’s currency fell 0.5 percent to 91.55 U.S. cents as of 1:53 p.m. in Sydney from 91.97 cents in New York yesterday. It bought 85.37 yen from 85.31 yen. New Zealand’s dollar fetched 70.97 U.S. cents from 71.02 cents yesterday when it touched 71.32 cents, the most since March 19. It rose 0.4 percent to 66.17 yen, near the most since Jan. 21. Australia’s dollar has gained 2.2 percent against the greenback this month and the kiwi has risen 1.6 percent. Benchmark interest rates are 4 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. Home Building Australia’s currency fell against 15 of its 16 major counterparts after the bureau of statistics said the number of permits granted to build or renovate houses and apartments decreased 3.3 percent from January, when they dropped a revised 5.5 percent. The median estimate of economists in a Bloomberg survey was for a 2.1 percent gain. “There was generally a soft tone to the data overall,” RBC’s Trinh said. “The risk is that the RBA is on hold.” The Australian dollar climbed 2 percent against the greenback this quarter as Reserve Bank of Australia Governor Glenn Stevens raised rates in March for the fourth time in five meetings. Traders are betting on 124 basis points in further increases over the next 12 months, according to a Credit Suisse AG index based on swaps trading. Declines in both South Pacific currencies against the dollar were limited on speculation fund managers will sell the greenback to adjust currency hedges. Currency Hedges “Everyone’s talking about these end-of-month flows where all the passive equity hedges have to rebalance,” said Tony Allen, head of currency trading at ANZ in Wellington. “They’re going to have to go and buy a lot of local currencies and sell the U.S. dollar.” The kiwi dollar has fallen 1.8 percent this quarter. New Zealand business confidence fell in March after reaching a 10-year high the previous month, according to a survey by ANZ National Bank Ltd. released today. A net 38.6 percent of companies surveyed expect sales and profits will rise over the next 12 months, down from 41.9 percent in February. A net 42.5 percent expect the broader economy will improve, down from 50.1 percent in the February survey. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 4.26 percent from 4.31 percent yesterday. Australian government bonds rose. The yield on 10-year notes fell one basis point, or 0.01 percentage point, to 5.78 percent, according to data compiled by Bloomberg. The price of the 4.5 percent security due April 2020 gained 0.08, or A$0.80 per A$1,000 face amount, to 90.34. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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