Australian Dollar Falls to 6-Week Low; Kiwi Is Little Changed

By Ron Harui and Candice Zachariahs

July 31 (Bloomberg) -- The Australian dollar fell to a six- week low after a government report showed retail sales dropped the most in six years, adding to signs the economy is slowing. The New Zealand dollar was little changed.

Australia's currency, known as the Aussie, headed for its first monthly loss since March after Reserve Bank of Australia figures showed lending to business and consumers rose at the slowest pace since 2002. New Zealand's currency traded near a 10-month low after the nation's business confidence fell for the first time in four months in July.

``The momentum of money has been toward the RBA pulling a rate cut forward from next year, and this report just fueled the fire,'' said Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp. ``It's negative for the Aussie dollar.''

The Australian dollar declined to 94.53 U.S. cents at 4:50 p.m. in Sydney from 94.71 cents late in Asia yesterday. It earlier touched 94.12 cents, the weakest since June 19. The currency bought 101.98 yen from 102.10 yen. It was poised for a fourth monthly gain versus the yen, having risen 0.2 percent.

The New Zealand's dollar traded at 73.43 U.S. cents from 73.31 cents late in Asia yesterday. It had earlier touched 73.11 cents, the weakest since Sept. 26. The currency traded at 79.23 yen from 79.03 yen. It has dropped 2.1 percent this month versus the yen, and was set for a second monthly loss.

Australia's retail sales fell 1 percent from May, when they rose a revised 0.9 percent, the Bureau of Statistics said. The median in a Bloomberg News economist survey was for no change. Credit provided by banks and other financial companies rose 0.4 percent from May, the central bank said. That was less than the 0.6 percent median estimate in a separate survey.

Australia's Trade Balance

The Aussie has fallen 1.4 percent this month as traders are betting the RBA will lower its 7.25 percent benchmark interest rate by 46 basis points in the next 12 months, up from 45 basis points yesterday, according to a Credit Suisse Group index based on interest-rate swaps.

Losses in Australia's currency were limited as the government said the trade balance turned to a surplus in June after coal and meat exports jumped, supporting the 17-year economic expansion. The surplus was A$411 million ($387 million) compared with a revised deficit of A$253 million in May. The median estimate of 24 economists surveyed by Bloomberg News was for a A$100 million shortfall.

New Zealand's dollar headed for a second monthly decline as a net 43.2 percent of companies expect the economy will worsen over the next 12 months, compared with 38.7 percent in June, a report from ANZ National Bank Ltd. in Wellington showed today.

`In the Mire'

The currency, known as the kiwi, may fall for a fourth day on speculation the Reserve Bank of New Zealand will cut interest rates to support economic growth. RBNZ Governor Alan Bollard emphasized yesterday an ``easing bias'' in monetary policy.

``Today's survey was yet another indicator confirming that the New Zealand economy is well and truly in the mire,'' said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington.

The kiwi has slid 1 percent the past five days, the second- worst performance among the 16 most-active currencies, after the RBNZ cut its official cash rate a quarter-percentage point to 8 percent on July 24 and signaled more rate reductions.

Traders are betting the RBNZ will cut its 8 percent benchmark interest rate by 149 basis points in the next 12 months, up from 143 basis points yesterday, according to a Credit Suisse Group index based on interest-rate swaps.

Excessive Loss

Losses in New Zealand's currency may be limited as technical charts some traders use to predict price movements signaled this month's 3.7 percent drop was too rapid.

``There's sentiment the kiwi has been oversold,'' said Lee Wai Tuck, a currency strategist at Forecast Pte Ltd. in Singapore. ``So, we're seeing some buying back of the kiwi.''

The New Zealand dollar's 14-day stochastic oscillator versus the U.S. currency was 7.4 today, according to data compiled by Bloomberg. A level below 20 suggests the kiwi has fallen too fast.

The chart measures the closing price of a security relative to its highs and lows during a particular period to try to predict whether it will rise or fall.

Australia's government bonds gained. The yield on the benchmark 10-year note fell 4 basis points, or 0.04 percentage point, to 6.23 percent. The price of the 5.25 percent security due March 2019 rose 0.275, or A$2.75 per A$1,000 face amount, to 92.498.

New Zealand's government debt advanced. The yield on the 10-year note fell 4 basis points, or 0.04 percentage point, to 6.12 percent. The price of the 6 percent security due December 2017 rose 0.245 to 99.107. Yields move inversely to prices.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Candice Zachariahs in New York at czachariahs1@bloomberg.net