Bloomberg News

N.Z. Dollar Declines After Inflation Slows, Aussie Loss Limited

October 24, 2011

Oct. 25 (Bloomberg) -- The New Zealand dollar declined against all of its 16 major peers after a report showed inflation slowed by more than economists forecast.

The so-called kiwi weakened against its U.S. counterpart on speculation the Reserve Bank of New Zealand will keep its benchmark interest rate at record low for longer. Losses in the Australian dollar were limited on prospects Asian stocks will extend a global rally, supporting demand for riskier assets.

“This is quite a negative surprise for the kiwi currency, and it’s quite a significant negative surprise to the Reserve Bank,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., Australia’s second-largest lender. “There’s now even less need for them to tighten as severely as they may have considered previously, so it has a downward risk to their interest-rate track and interest rates in the short end should fall on this, which should weigh on the kiwi dollar.”

The New Zealand dollar fell 0.3 percent to 80.52 U.S. cents as of 9:48 a.m. Sydney time. It slid 0.2 percent to 61.30 yen. Australia’s dollar was little changed at $1.0468 and 79.71 yen.

U.S. stocks rallied yesterday, almost wiping out this year’s decline in the Standard & Poor’s 500 Index. The S&P 500 gained 1.3 percent and the Thomson Reuters/Jefferies CRB index of raw materials advanced 2.4 percent.

New Zealand’s consumer prices gained 0.4 percent in the third quarter from the second, when they advanced 1 percent, Statistics New Zealand said in Wellington today. The median estimate in a Bloomberg News survey of 16 economists was for a 0.7 percent increase.

--Editors: Nate Hosoda, Jonathan Annells

To contact the reporters on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net


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