Bloomberg News

N.Z. Dollar Falls After Inflation Slows; Aussie Near 6-Week High

October 25, 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 snapped a three-day advance against its U.S. counterpart on speculation the Reserve Bank of New Zealand will signal this week a willingness to keep its benchmark interest rate at record low for longer. The Australian dollar dropped as stocks fell, reducing demand for higher-yielding 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. “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 1.4 percent to 79.65 U.S. cents at 11:30 a.m. New York time. It slid 1.6 percent to 60.46 yen. Australia’s dollar dropped 0.4 percent to $1.0435 after yesterday reaching $1.0501, the most since Sept. 9. The so- called Aussie was at 79.21 yen from 79.71 yen.

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.

“No doubt that RBNZ will remain on hold for some time,” Roland Randall, an economist at TD Securities Inc. in Singapore, wrote in a research note today. “Now the RBNZ could choose to dwell on weaker domestic activity and price signals, as well as risks from offshore; and that would make for a more dovish statement than it delivered in September.”

All 17 economists surveyed by Bloomberg expect New Zealand’s central bank to keep its target rate unchanged at 2.5 percent at its meeting on Oct. 27.

--With assistance from Catarina Saraiva in New York. Editor: Dave Liedtka

To contact the reporter 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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