Australian, N.Z. Dollars Fall 2nd Day as U.S. Economy Falters

By Patricia Lui

April 15 (Bloomberg) -- The Australian and New Zealand dollars slid for a second day as government reports showed U.S. retail sales and producer prices unexpectedly fell, puncturing optimism that the worst of the global slump is ending.

The currencies weakened against the yen as Asian stocks declined for the first time in five days, reducing appetite for higher-yielding assets. Goldman Sachs Group Inc., which sold $5 billion in shares, dropped 12 percent as Standard & Poor’s said the bank’s better-than-estimated earnings may not be sustainable.

“The Aussie and the kiwi had a strong run up the past few days and it’s not too surprising they are correcting a little especially after softer U.S. retail sales last night and softer U.S. stocks,” said Richard Grace, chief currency strategist at Commonwealth Bank of Australia in Sydney. “Commodities are also softer in Asian trading this morning. Those reasons are good enough catalysts for traders to take some profit.”

Australia’s dollar weakened to 71.91 U.S. cents as of 11:13 a.m. in Sydney, from 72.39 cents yesterday. It declined 0.8 percent to 71.05 yen. New Zealand’s currency fell to 57.92 U.S. cents from 58.32 cents. It fell 0.8 percent to 57.23 yen.

Retail sales in the U.S. unexpectedly dropped in March for the first time in three months, declining 1.1 percent, the Commerce Department said yesterday in Washington. The Labor Department said wholesale prices fell last month, indicating that deflation risks remain.

‘A Hammer Blow’

The figures served to temper optimism the world’s largest economy has passed through the worst of its recession, even as Federal Reserve Chairman Ben S. Bernanke said there were “tentative signs that the sharp decline” in the economy was easing. He cited “progress” in stabilizing financial markets, which he said was critical to a sustainable recovery, he said

“U.S. March retail sales were a hammer blow to those who had begun to turn optimistic after recent less-than-horrible economic news,” David Watt, senior currency strategy in Toronto at RBC Capital Markets, wrote yesterday in a note to clients. “Although Goldman had set tongues aflutter with their early earnings release, the aftertaste was rather unpleasant.” while speaking at Morehouse College in Atlanta yesterday.

A leading Australian economic index fell in February at the sharpest pace since 1982. The index, a gauge of future economic growth, dropped 0.3 percent to 248.6 points from 249.4 in January, Westpac Banking Corp. and the Melbourne Institute said in Sydney today. The index shrank at an annualized rate of 5.1 percent.

“I expect the Australian dollar to go lower in the next week or so, possibly going under 70 to the U.S. dollar before heading higher again,” Grace said.

Stocks Decline

The MSCI Asia Pacific Index lost 0.7 percent to 88.91, snapping a four-day, 5.6 percent advance. The Australian S&P/ASX 200 Index lost 0.15 percent, ending two days of gains, while the New Zealand benchmark Top 50 index fell 0.2 percent.

“We’re seeing a dampening of the positive equity sentiment that was growing since the beginning of March where people were thinking that the world economy may have been reaching a bottom,” said Imre Speizer, a market strategist in Wellington at Westpac Banking Corp. “That optimism was getting a bit stretched and the current pullback is a cautious signal the bear-market rally may be coming to an end.”

Australian bonds rose for the first time in three days. The yield on the benchmark 10-year note declined one basis point, or 0.01 percentage point, to 4.60 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security maturing March 2019 rose 0.1, or A$1 per A$1,000 face amount, to 105.12.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, slid to 3.77 percent from 3.80 percent yesterday.

To contact the reporter on this story: Patricia Lui in Singapore at plui4@bloomberg.net