Yen, South Korean Won, Taiwan's Dollar: Asia Currency Preview

By Tracy Withers

July 21 (Bloomberg) -- The New Zealand dollar may decline on speculation that Reserve Bank Governor Alan Bollard will cut the benchmark interest rate as early as this week.

The currency may fall for a fourth day as investors have increased bets for New Zealand's first rate cut since 2003 amid signs that the economy has stalled. The chance of a quarter- point rate cut on July 24 is 56 percent, according to an index calculated by Credit Suisse Group based on swaps trading.

``Expect positioning ahead of this week's rate review to cap the New Zealand dollar,'' said Khoon Goh, economist at ANZ National Bank Ltd. in Wellington. ``It will be a close call. The Reserve Bank may well choose to buy some time to evaluate a developing economic picture.''

New Zealand's currency bought 76.11 U.S. cents at 9:45 a.m. in Wellington from 76.12 cents in late New York trading July 18. It bought 81.39 yen from 81.40 yen.

On June 5, Bollard said it is likely he will cut the official cash rate from a record-high 8.25 percent this year as the economy slows.

Two of 13 economists surveyed by Bloomberg News expect Bollard will cut the benchmark rate this week. The other 11 expect a cut in September.

A report last week showed annual inflation accelerated faster than the Reserve Bank expected, which may prompt Bollard to delay any rate cut for another six weeks, economists say.

The economy contracted in the first three months of the year and at least 8 of 13 economists expect the economy also shrank in the second quarter, putting New Zealand in its first recession since 1998. A government report today may show a decline in spending on debit and credit cards in June, adding to signs that consumer spending has slowed.

A net 23 percent of companies say sales will slow in the next three months, the most pessimistic outlook since 1990, suggesting the economy will also contract in the third quarter, according to a July 8 report from the New Zealand Institute of Economic Research.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net