The New Zealand dollar declined, snapping a two-day gain, after the slowest consumer-price growth in 12 years prompted speculation the central bank will keep interest rates at a record low for longer.
Losses in the so-called kiwi and Australian dollar against the greenback were limited before Federal Reserve Chairman Ben S. Bernanke testifies before the Senate Banking Committee today, amid speculation he may signal additional bond purchases. Australia’s dollar fell for a second day against the yen on signs global growth is slowing.
“The New Zealand dollar can see some softening on the CPI data,” said Hans Kunnen, chief economist at St. George Bank Ltd. in Sydney. “It suggests that the central bank have room to move interest rates if they need to and the economy is not growing as robustly as they might like.”
New Zealand’s dollar fell 0.2 percent to 79.61 U.S. cents as of 9:40 a.m. in Sydney from yesterday. It also lost 0.2 percent to 62.80 yen.
New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, dropped five basis points, or 0.05 percentage point, to 2.60 percent.
Australia’s dollar was little changed at $1.0241 from $1.0249 yesterday when it added 0.2 percent. The Aussie bought 80.77 yen from 80.83 yen yesterday, when it slid 0.2 percent.
New Zealand consumer prices rose 0.3 percent from the first quarter, when they advanced 0.5 percent, Statistics New Zealand said in Wellington today. The median estimate in a Bloomberg News survey of economists was for a 0.5 percent increase. Prices rose 1 percent in the year ended June 30, the slowest annual pace since the final quarter of 1999.
Fed Chairman Bernanke will deliver his monetary policy report to the Senate today. The Federal Open Market Committee’s June 19-20 meeting debated the need for further stimulus measures, the minutes released July 11 showed. Two participants supported additional bond purchases, while two others said only a further deterioration in the economy would warrant them.
“The last few days have been all about the lead up to the Bernanke’s testimony and that will continue to be the main driver of the markets,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp. (WBC), Australia’s second-largest lender. “I expect the Aussie to be higher on the day.”
Retail sales in the U.S. decreased for the third straight month in June, Commerce Department data showed yesterday. Sales fell 0.5 percent, worse than the most-pessimistic forecast in a Bloomberg News survey in which the median projection called for a 0.2 percent increase. Purchases last fell for three or more months in July through December 2008.
Futures traders increased their bets that the Australian dollar will gain versus 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 Aussie compared with those on a drop was 19,065 on July 10. The so-called net longs were 9,348 a week earlier.
The Reserve Bank of Australia will release minutes of its July 3 meeting today in Sydney. Governor Glenn Stevens and his board left the overnight cash-rate target at a 2 1/2-year low of 3.5 percent this month, saying its recent reductions in borrowing costs will help the economy weather a more subdued global outlook. The decision was predicted by all 28 economists surveyed by Bloomberg News.
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