Aussie Dollar Drops Versus Peers After Retail Sales Fell

By Kristine Aquino - May 30, 2012 9:10 AM GMT+0700

Australia’s dollar slid versus all of its 16 major peers after retail sales in the nation unexpectedly dropped, boosting speculation the Reserve Bank will have more scope to lower borrowing costs.

The so-called Aussie headed for its biggest monthly decline in eight months against the greenback as bets the central bank will cut its key rate damped demand for the currency. Australia’s three-year yields tumbled to a record. New Zealand’s dollar, known as the kiwi, fell versus its U.S. and Japanese peers after building permits in the country dropped in April. Both South Pacific currencies also slid as Asian stocks retreated.

The retail data were “certainly worse than expected,” said Callum Henderson, global head of currency research at Standard Chartered Plc in Singapore. “The market is in risk-off mode and, as such, is continuing to look to sell into rallies in the higher-yielding currencies including the Aussie.”

Australia’s dollar fell 0.6 percent to 97.89 U.S. cents as of 12:08 p.m. in Sydney. It lost 0.6 percent to 77.80 yen. New Zealand’s currency declined 0.5 percent to 75.95 cents. It dropped 0.5 percent to 60.38 yen.

Bonds Rally

Australian bonds rose, pushing the 10-year yield down by four basis points, or 0.04 percentage point, to 3.1 percent. The three-year yield touched 2.313 percent, the least in data compiled by Bloomberg going back to 1990. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, climbed 3.75 basis points to 2.53 percent.

The kiwi has dropped 7.2 percent versus the greenback since April 30, the worst performance among 16 major counterparts of the U.S. dollar, according to data compiled by Bloomberg. The Aussie has fallen 6.1 percent, poised for its biggest slide since September.

The MSCI Asia Pacific Index of shares slumped 1.3 percent, snapping a two-day advance.

Retail sales in Australia declined 0.2 percent in April from a month earlier, after a revised 1.1 percent advance in March, the Bureau of Statistics said today. The median prediction in a Bloomberg News survey was for a 0.2 percent climb.

Twenty five of 28 economists in a separate poll predict RBA Governor Glenn Stevens will hold the overnight cash rate target at 3.75 percent at the next central bank meeting on June 5. Interest-rate swaps data compiled by Bloomberg show traders are certain policy makers will reduce the benchmark next week, with a better than 30 percent chance they will lower it to 3.25 percent.

In New Zealand, home building approvals declined 7.2 percent in April from a month earlier after a revised 19.6 percent gain in March.

To contact the reporter on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net

To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net