Aussie Declines After Retail Sales Unexpectedly Fall

Australia’s dollar fell to the lowest this year after data showed the nation’s retail sales unexpectedly dropped for a third month, adding to prospects the Reserve Bank will cut interest rates next month.

The so-called Aussie slid against all of its major peers after the central bank left the cash-rate at a half-century low yesterday and said the inflation outlook “would afford scope to ease policy further.” New Zealand’s dollar touched the strongest since July 2010 versus its Australian peer after Auckland-based Fonterra Cooperative Group Ltd., said whole-milk powder prices rose and before a report that may show the smaller nation’s jobless rate fell.

“Retail numbers came in on the weak side,” said Callum Henderson, the Singapore-based global head of currency research at Standard Chartered Plc. “While the RBA is on hold, that set of data is likely to add to expectations for further easing later this year.”

The Aussie declined 0.3 percent to $1.0356 at 5:26 p.m. in Sydney and touched $1.0342, the lowest since Dec. 25. It slid 0.2 percent to 97.11 yen, after touching 97.44 yesterday, the highest since August 2008. It declined 0.3 percent to NZ$1.2263, after reaching NZ$1.2247, the lowest since July 2010.

New Zealand’s kiwi dollar bought 84.45 U.S. cents from 84.53 yesterday. It touched 79.42 yen, the highest since July 2008, before trading 0.1 percent higher at 79.19.

Retail Sales

Retail sales in Australia fell 0.2 percent in December from the previous month, capping their longest stretch of declines in 13 years, the statistics bureau said in Sydney today. The median estimate of economists surveyed by Bloomberg News was for 0.3 percent growth.

RBA Governor Glenn Stevens and his board left the overnight cash rate target at 3 percent yesterday, in line with economists forecasts. Interest-rate swaps data compiled by Bloomberg show traders see a 55 percent chance the RBA will lower the benchmark rate on March 5.

The yield on Australia’s 10-year bonds rose 3 basis points, or 0.03 percentage point, to 3.52 percent.

The unemployment rate probably rose to 5.5 percent in January from 5.4 percent the previous month, according to the median estimate of economists before the data tomorrow.

N.Z. Jobless

“If the Australian labor force data tomorrow disappoints, we would expect market expectations for next month’s rate cut to lift a little” said Peter Dragicevich, a currency economist at Commonwealth Bank of Australia in Sydney. “We expect the New Zealand dollar to outperform the Aussie.”

New Zealand’s currency was supported before a report tomorrow forecast to show the country’s unemployment fell. Economists in a Bloomberg poll expect the statistics bureau will say the jobless rate declined to 7.1 percent in the fourth-quarter from 7.3 percent in the previous period.

Milk powder for April delivery rose 5.8 percent, according to a trade-weighted index on Fonterra’s GlobalDairyTrade website. The near-term contract for New Zealand product was $3,446 a metric ton, the highest price since Oct. 16. Fonterra is the world’s biggest dairy exporter.

New Zealand’s two-year swap rate, a fixed payment made to receive a floating rate, was at 2.93 percent.