By Candice Zachariahs Feb. 18 (Bloomberg) -- The Australian dollar fell for a second day as demand for the U.S. currency increased after reports showed the world’s biggest economy is improving and Federal Reserve officials debated unwinding stimulus measures. New Zealand’s currency also dropped before a U.S. Conference Board report forecast to show an index of leading economic indicators climbed for a 10th month. The Australian dollar extended losses as gold, the nation’s third most valuable commodity export, fell after the International Monetary Fund said it would begin selling some of its reserves. “The environment looks pretty upbeat for the U.S. dollar at the moment,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Sydney. The IMF plan has “put gold under pressure and some of the commodity currencies are coming off on the back of that.” Australia’s currency fell to 89.54 U.S. cents as of 2:09 p.m. in Sydney from 89.95 cents in New York yesterday, when it climbed to 90.37 cents, the highest since Jan. 28. The currency declined 0.7 percent to 81.49 yen. New Zealand’s dollar slid 0.5 percent to 70.01 U.S. cents and slipped 0.8 percent to 63.70 yen. Investors should the Australian currency on “dips ahead of the 89.30-cent level,” Cavenagh said. The Fed said its top officials last month debated how and when to shrink the central bank’s $2.26 trillion balance sheet, according to minutes of its Jan. 26-27 meeting released yesterday in Washington. Industrial Production Industrial production in the U.S. climbed 0.9 percent last month, after gaining a revised 0.7 percent in December, figures from the Fed showed. Futures on the Chicago Board of Trade show a 47 percent chance U.S. policy makers will increase their target rate for overnight bank lending by at least a quarter of a percentage point by their September meeting. New Zealand’s currency ended two days of gains versus the yen after an industry report showed consumer confidence declined in February. Consumers are confident about future conditions, though are less optimistic about their current situation, according to the report compiled by Roy Morgan Research and ANZ National Bank Ltd. “The lack of conviction in regard to current conditions suggests consumers remain cautious in regard to spending,” ANZ said. “The recovery process will be gradual and guarded.” China Spending Losses in Australia’s dollar were tempered as Reserve Bank of Australia assistant governor Philip Lowe said China’s infrastructure spending would likely continue for some decades. China may grow “for many years with extraordinarily high levels of investment,” Lowe said in Sydney. “I’m quite optimistic that story has some decades to run.” China is Australia’s largest trading partner. Australian government bonds fell for a third day. The yield on the benchmark 10-year note gained four basis points to 5.55 percent, according to data compiled by Bloomberg. The 5.25 percent security due March 2019 slipped 0.25, or A$2.50 per A$1,000 face amount, to 97.89. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was little changed at 4.23 percent. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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