Sept. 14 (Bloomberg) -- The New Zealand dollar, the world’s second best-performing currency in the past six months, dropped after an unexpected slide in retail sales sparked concern the currency’s recent gains have been too rapid. Australia’s dollar slipped from its strongest levels since August 2008 as prices weakened for commodities that account for more than half the nation’s exports. The London Metals Index lost 3.5 percent on Sept. 11. Both currencies also weakened after China yesterday announced a probe into the alleged dumping of American auto and chicken products, two days after the U.S. imposed tariffs on imports of tires from the Asian nation. “The kiwi’s being sold pretty hard,” after the retail sales data, said Tim Kelleher, vice-president of institutional banking and markets in Auckland at the Commonwealth Bank of Australia. “We can see a bit of a pullback because the market has been too much one way.” New Zealand’s dollar fell 1.2 percent to 69.92 U.S. cents as of 4:28 p.m. in Wellington from 70.74 cents in New York last week, when it climbed to its highest since Aug. 25, 2008. It bought 63.23 yen from 64.17 yen. Australia’s currency fell 0.6 percent to 85.78 U.S. cents from 86.34 cents in New York on Sept. 11, when it touched 86.76, the most since Aug. 28, 2008. The currency slid 0.9 percent to 77.58 yen. The so-called kiwi slid by the most in two weeks as retail sales retreated for a second month in July, dropping 0.5 percent from June, compared to the median forecast for a 0.4 percent gain according to a Bloomberg News survey of economists. That followed Australian government reports last week that showed the economy may slow in coming months. Employment fell in August by almost twice as much as economists estimated, retail sales unexpectedly dropped in July and home-loan approvals ended a record nine-month run of gains as the effect of government stimulus spending waned. New Zealand Rates The New Zealand dollar is the best performer in the past six months after the Seychelles rupee among 176 currencies and precious metals tracked against the U.S. dollar by Bloomberg News. Optimism the global economy will recover has encouraged traders to bet the nation’s central bank will move to raise interest rates from a record low. The Reserve Bank of New Zealand will increase its benchmark by 84 basis points over 12 months, according to a Credit Suisse AG index based on swaps trading. The 14-day relative strength index for the New Zealand dollar was at 62.16 after closing above 70 on Sept. 10 and 11. A reading above 70 signals a change in direction may be imminent. Benchmark interest rates are 3 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits. RBA Minutes Demand for the Australian dollar was tempered before the release of minutes to the central bank’s September meeting tomorrow. Governor Glenn Stevens left interest rates unchanged for a fifth month at that meeting and said the setting of monetary policy was “appropriate” for now. The extra yield offered by two-year Australian government bonds over similar maturity U.S. Treasuries declined for a fifth day today to 3.25 percentage points from 3.63 on Sept. 7. “With the market disappointed by the RBA’s neutral stance and failure to shift to a clear tightening bias at its meeting two weeks ago, the risk is that the RBA uses the minutes to try to talk down expectations for rate hikes,” Amber Rabinov, an economist in Melbourne at Australia & New Zealand Banking Group Ltd., wrote in a note to clients today. China-U.S. Spat Both currencies also weakened amid concerns an increase in protectionism would slow the global recovery after China said the dumping and subsidy probes involve “some” auto and chicken imports from the U.S., without specifying which ones. “The dollar should bounce back on the back of trade tensions that have occurred over the weekend between the U.S. and China,” said Greg Gibbs, a foreign-exchange strategist at Royal Bank of Scotland Group Plc in Sydney, in a Bloomberg Television interview. The news is “creating some fears this could spill over to U.S. equity markets or equity markets in general and take some of that risk appetite off the table.” Futures, Bonds Futures traders increased bets the Australian dollar will gain against the U.S. currency, figures from the Washington- based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on an advance in the Australian dollar compared with those on a drop -- so-called net longs -- was 48,384 on Sept. 8, compared with net longs of 41,936 a week earlier. Australian government bonds rose for a second day. The yield on 10-year notes fell three basis points, or 0.03 percentage point, to 5.26 percent, according to data compiled by Bloomberg. The price of the 5.25 percent security due March 2019 added 0.233, or A$2.33 per A$1,000 face amount, to 99.907. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell to 3.95 percent from 3.97 last week.

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