By Monami Yui Dec. 14 (Bloomberg) -- New Zealand’s dollar traded near a 10-year low against Australia’s after a government report showed retail sales in the smaller nation slid by the most since 1997. The so-called kiwi weakened against all 16 of its major counterparts after a survey of forecasters predicted New Zealand’s economy will expand at a slower pace than previously estimated as consumer spending remains sluggish. The Australian dollar traded close to its strongest level in a month versus the greenback after commodities and stocks advanced, boosting demand for the country’s higher-yielding assets. “Kiwi fell quite sharply in response to a big fall in retail sales,” said John Kyriakopoulos, head of currency strategy in Sydney at National Australia Bank Ltd., the nation’s largest lender. “What’s been happening is the market has been pushing out the timing for when the Reserve Bank of New Zealand will raise rates again.” New Zealand’s dollar traded at NZ$1.3267 per Aussie as of 4:42 p.m. in Sydney from NZ$1.3263 in New York yesterday, after falling to NZ$1.3288, the weakest since November 2000. The currency slipped 0.1 percent to 75.03 U.S. cents, and fell 0.1 percent to 62.62 yen. Australia’s currency bought 99.52 U.S. cents from 99.62 cents yesterday, when it appreciated to 99.85 cents, the strongest since Nov. 12. The so-called Aussie was unchanged at 83.08 yen. Sales Decline Retail sales in New Zealand declined 2.5 percent from September, when they rose a revised 1.7 percent, Statistics New Zealand said in Wellington. The drop was the biggest since May 1997 and was more than three times the 0.8 percent decline estimated in a Bloomberg News survey. The economy will grow by 2.1 percent in the year ending March 31, 2011, according to economists surveyed by the Wellington-based New Zealand Institute of Economic Research Inc. Three months ago, they forecast a 2.8 percent expansion. New Zealand’s budget cash deficit will be wider than the government’s earlier forecast as a slower-than-projected economic recovery curbs tax receipts and the worst earthquake in 80 years increases expenditures, the Treasury said in a statement released today. The Reserve Bank of New Zealand will increase its target rate by 64 basis points over the next 12 months, according to an index compiled by Credit Suisse Group AG. Central bank Governor Alan Bollard kept the official cash rate at 3 percent on Dec. 9 and said borrowing costs will likely rise “to a more limited extent” during the next two years. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell one basis point to 3.83 percent. ‘Lots of Liquidity’ Australia’s dollar held onto yesterday’s gains versus the U.S. currency on speculation Federal Reserve policy makers meeting today will reiterate their policy of buying bonds to cap interest rates, fuelling demand for assets tied to growth. Fed Chairman Ben S. Bernanke said on Dec. 5 an expansion of the $600 billion bond purchase plan was “certainly possible.” “The Fed is unlikely to suggest any major shift from what’s already been announced,” said Takuya Kawabata, a researcher in Tokyo at Gaitame.com Research Institute Ltd., a unit of Japan’s largest foreign-exchange margin company. “But lots of liquidity will still remain in the markets and find its way abroad. That’s supportive of commodity-related currencies like the Aussie.” The Reuters/Jefferies CRB Index of raw materials rose 1.6 percent yesterday and the MSCI Asia Pacific Index of shares advanced for a second day today, gaining 0.4 percent. The Australian dollar has strengthened 9.9 percent this year in a measure of 10 developed-nation currencies, according to Bloomberg Correlation-Weighted Currency Indexes. New Zealand’s dollar has risen 2 percent. --Editors: Nate Hosoda, Nicholas Reynolds To contact the reporter on this story: Monami Yui in Tokyo at myui1@bloomberg.net. To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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