New Zealand Dollar at 7-Year Low Against Aussie on Rate View

By Candice Zachariahs

July 22 (Bloomberg) -- The New Zealand dollar fell to its lowest in more than seven years against the Australian currency and for a fifth day against the U.S. dollar on speculation the central bank will cut interest rates this week.

The kiwi, as it's called, retreated to its weakest since December 2000 against the Australian dollar. It fell versus 13 of the 16 most-traded currencies as investors bet the central bank will reduce rates from 8.25 percent on July 24.

``People looking for higher yields in any medium-term vehicle are more attracted to Australia than New Zealand,'' said Tony Allen, head of currency trading in Wellington at ANZ National Bank Ltd. ``When there's a chance of easing, traditionally the kiwi's gone down aggressively in the week leading up to the announcement.''

New Zealand's currency bought 76.12 U.S. cents at 8:20 a.m. in Wellington from 76.27 cents in late Asian trading yesterday. It traded at 1.2824 per Australian dollar, from 1.2805. It bought 81.15 yen, from 81.37.

The chance of a quarter-percentage point cut at the Reserve Bank of New Zealand's next meeting was 55 percent yesterday, from 28 percent a month ago, according to an index calculated by Credit Suisse Group based on overnight swaps trading. The bank hasn't reduced rates since 2003. The benchmark rate in Australia is 7.25 percent.

Reserve Bank of New Zealand Governor Alan Bollard said June 5 that it's likely he will cut the official cash rate this year as the economy slows.

To contact the reporter on this story: Candice Zachariahs in New York at czachariahs1@bloomberg.net