Australian Dollar Slips From 7-Month High as Equities Decline

May 6 (Bloomberg) -- The Australian dollar fell from near a seven-month high as concern stress tests will show some of the U.S.’s biggest banks need more capital sapped demand for higher- yielding assets.

New Zealand’s currency weakened for the first day in four as its Treasury Department said the cash budget deficit was wider than the government forecast in March and would continue until at least June. Australia’s dollar extended declines after retail sales and exports rose in March by more than economists estimated.

“What really is concerning us today in currency markets is the stress tests and the resulting uphill battle U.S. banks will face to raise funds,” said Robert Rennie, chief currency strategist at Westpac Banking Corp. in Sydney. “That hurts the Australian dollar by undercutting risk appetite as the rally in U.S. stocks fades.”

Australia’s currency slumped 0.9 percent to 73.62 U.S. cents as of 11:51 a.m. in Sydney from 74.26 cents in New York yesterday, when it touched 74.79 cents, the strongest since Oct. 6. The currency declined 1.5 percent to 72.26 yen.

New Zealand’s dollar weakened 0.5 percent to 57.73 U.S. cents from 58.04 cents yesterday, when it touched 58.65 cents, the most since April 14. It bought 56.67 yen from 57.34 yen.

New Zealand Jobless

New Zealand’s dollar also fell before a report tomorrow forecast to show the jobless rate climbed to 5.3 percent in the first quarter, the most since September 2002. A report in Australia the same day will likely show the unemployment rate there grew in April to 5.9 percent, the most since July 2003, according to the median estimate in a Bloomberg News survey.

“The Australian dollar looks like it’s at the top of the range and won’t break much above 75 U.S. cents in the short- term,” said Tony Allen, head of currency trading at ANZ National Bank Ltd. in Wellington. The currency will “struggle” to rise above 74.40 cents and may decline toward 73.40 today, he said. the new Zealand dollar will likely trade between 57.70 U.S. cents and 58.30 cents today, he said.

Australia today sold A$700 million ($517.4 million) of securities maturing April 2020 at a weighted average yield of 5 percent. The so-called bid-to-cover ratio at the auction was 3.2.

The rate Australian banks charge each other for three-month loans advanced seven basis points to 3.14 percent, Australian Financial Markets Association data show. The difference between that rate and the overnight swap rate was 27 basis points. A basis point is 0.01 percentage point.

Australian government bonds advanced for the first day in six. The yield on 10-year notes fell one basis point, or 0.01 percentage point, to 4.80 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 rose 0.09, or A$0.90 per A$1,000 face amount, to 103.47.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, rose to 3.48 percent from 3.45 yesterday.