Corrects current Australian target rate in seventh paragraph.) Sept. 10 (Bloomberg) -- The Australian dollar fell for the first time this week after employers cut a greater-than-expected 27,100 jobs last month, easing pressure on the central bank to raise interest rates. New Zealand’s currency erased gains. The New Zealand and Australian dollars, the world’s best- and third-best performing major currencies in the past six months, retreated from yesterday’s one-year highs as traders pared bets for policy makers to increase borrowing costs. Australia’s jobless figures follow reports yesterday that showed retail sales unexpectedly fell for a second month and home-loan approvals ended a record nine-month run of gains. “The interest-rate bulls are going to have to pull their heads in after two days of weaker-than-expected data in Australia,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia, the nation’s second- largest lender by market value. “You can forget about an October rate rise, December looks far more likely.” Australia’s currency dropped 0.5 percent to 85.86 U.S. cents as of 12:03 p.m. in Sydney, from 86.24 cents in New York yesterday, when it climbed to 86.69 cents, the most since Aug. 28, 2008. It fell 0.3 percent to 79.11 yen. Australia’s currency may slide toward 85.50 U.S. cents, Capurso said. The New Zealand dollar was at 69.64 U.S. cents from 69.59 cents yesterday, when it rose to 70.08 cents, the strongest since Aug. 29, 2008. The so-called kiwi gained 0.1 percent to 64.10 yen and climbed 0.5 percent to NZ$1.2340 versus the Australian dollar. Jobs Cuts The number of people employed dropped 27,100 from July, the statistics bureau said in Sydney today. The median estimate of economists surveyed by Bloomberg was for a decline of 15,000. The jobless rate held at 5.8 percent. Investors have a 12 percent expectation Reserve Bank of Australia Governor Glenn Stevens will raise borrowing costs in October by a quarter point from the current level of 3 percent, according to interbank futures on the Sydney Futures Exchange. That’s down from 24 percent odds yesterday. “The market proved itself to have too much in the way of good news priced in, in the short term,” said Sue Trinh, senior currency strategist at RBC Capital Markets in Sydney. “The Aussie dollar has been knocked down.” New Zealand Rates Reserve Bank of New Zealand Governor Alan Bollard left the official cash rate at a record-low of 2.5 percent today and signaled a move away from further rate cuts, compared with the previous monetary policy statement on July 30. “New Zealand’s central bank wasn’t quite as aggressive as it might have been, switching away from the possibility of rate cuts to a commitment to keeping rates at a record low,” said Sean Callow, senior currency strategist at Westpac Banking Corp. in Sydney. “The kiwi is also benefiting from the current broad pessimism regarding the U.S. dollar.” “The forecast recovery in economic activity is based on monetary policy continuing to provide substantial support to the economy,” Bollard said in today’s statement. “We continue to expect to keep the official cash rate at or below the current level through until the latter part of 2010.” Bollard had said July 30 that the target rate “could still move modestly lower over the coming quarters.” Export Prices The New Zealand dollar was little changed after the country’s statistics bureau said export prices posted their biggest decline in more than 58 years, shrinking the nation’s terms of trade index for a fifth-straight quarter. The report also showed second-quarter export volumes rose and imports fell. That adds to evidence the economy may be emerging from recession, said Annette Beacher, an economist at TD Securities Ltd. in Singapore. “This significantly tilts the odds toward a positive GDP outcome for the June quarter, whereas previously we were expecting a flatter outcome,” Beacher wrote today in a research note. The New Zealand and Australian currencies surged over the past six months as prospects of a global economic revival spurred demand for higher-yielding assets. The U.S. dollar became the cheapest funding currency in London this week, making it more attractive as a means of financing purchases of higher-yielding assets. The three-month London interbank offered rate, or Libor, for loans in dollars fell today to a record low of 0.299 percent, compared with 3.395 percent for the Australian currency and 3.0475 for the New Zealand dollar, according to the British Bankers’ Association. Australian bonds rose for a third day. The yield on the benchmark 10-year note slid one basis point to 5.40 percent, according to data compiled by Bloomberg. The 5.25 percent security due March 2019 climbed 0.077, or 77 Australian cents per A$1,000 face amount, to 98.904. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, declined to 4 percent from 4.05 percent yesterday.

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