Australian, N.Z. Dollars Slide on U.S. Economy, G-20 Inaction

By Candice Zachariahs

Nov. 17 (Bloomberg) -- The Australian and New Zealand dollars fell on concern the U.S. economic slump will push the world into a recession and that leaders from the Group of 20 nations may not be able to revive growth.

The Group of 20 called for a ``broader policy response'' including additional interest-rate cuts and fiscal stimulus, in a statement on Nov. 15 at the end of a two-day meeting in Washington. The currencies were also lower as a record drop in U.S. retail sales in October increased concern that corporate earnings will deteriorate as the world's largest economy slows.

The G-20 talks are ``certainly a positive step, but it's going to be some time before we see the impact of the weekend's meeting in Washington flow through to some tangible actions,'' said Mike Symonds, head of currency trading at Bank of New Zealand Ltd. in Wellington. The Australian and New Zealand dollars ``will trade lower overall in the next 24 to 48 hours.''

Australia's currency fell 1.2 percent to 64.02 U.S. cents as of 11:43 a.m. in Sydney from 64.81 cents late in New York last week. The currency declined 2.2 percent to 61.61 yen.

New Zealand's dollar was 0.5 percent weaker at 55.03 U.S. cents from 55.30 cents in New York last week. It bought 52.95 yen from 53.71.

Australia's dollar extended declines as third-quarter retail sales rose less than economists had estimated.

Retail sales, adjusted to remove the effect of inflation, increased 0.1 percent from the June quarter when they fell 0.2 percent, the Bureau of Statistics said in Sydney today. The median forecast of 15 economists surveyed by Bloomberg New was for a 0.4 percent gain.

U.S. Economy

The South Pacific nations' currencies fell after the G-20 meeting set a March deadline for recommendations on strengthening accounting standards, derivatives markets and oversight of hedge funds and debt-rating companies. The Group promised to meet again before May.

U.S. consumer prices probably dropped 0.8 percent last month, the most since 1949, according to the median estimate in a Bloomberg survey before a report due Nov. 19. Builders broke ground on the fewest houses in at least a half century and factory output weakened further, other reports this week may show.

The Australian and New Zealand currencies dropped on Nov. 14 in New York as a Commerce Department report showed that sales at U.S. retailers fell 2.8 percent in October, the biggest drop since records began in 1992.

Shorting Australia's Dollar

Futures traders increased bets the Australian dollar will decline against the U.S. dollar, 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 a decline in the Australian dollar compared with those on a gain -- so-called net shorts -- was 8,604 on Nov. 11, compared with net shorts of 5,513 a week earlier.

The South Pacific nations' currencies dropped over the past three months as their central banks cut interest rates three times to boost domestic demand, reducing the appeal of the currencies for international investors seeking higher returns.

Benchmark interest rates are 5.25 percent in Australia and 6.5 percent in New Zealand, compared with 0.3 percent in Japan and 1 percent in the U.S.

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net