N.Z. Dollar Falls After Inflation Data; Australia Dollar Drops

[Enivid]

The New Zealand dollar approached a six-week low after a government report showed consumer prices fell last quarter, giving the central bank more room to cut interest rates to a record low next week.

Australia’s currency also weakened, ending two days of gains, after the European Commission lowered its forecast for the euro-area economy, adding to concern the global slowdown will worsen. Higher interest rates in Australia and New Zealand have made the two nations’ currencies favorites with investors seeking extra yield, helping them reach the strongest in more than 20 years against the dollar in 2008.

“This reinforces the theme that the Reserve Bank of New Zealand will cut rates when they meet,” said Danica Hampton, a strategist at Bank of New Zealand Ltd. in Wellington. “The global backdrop is very heavy. People are keen to sell growth- sensitive currencies like the kiwi,” she said, referring to the currency by its nickname.

New Zealand’s currency slid 3.1 percent, the most in a week, to 53.16 U.S. cents as of 4:31 p.m. in Sydney from late in Asia yesterday. It touched 53.08 cents, near the 52.80 cents it reached last week which was the lowest since Dec. 4. The currency dropped 3.5 percent to 47.91 yen.

Australia’s currency slid 2.7 percent to 65.94 U.S. cents, and dropped 3.2 percent to 59.44 yen.

From Bloomberg News.