New Zealand Currency Gains Versus Aussie Dollar on Rate Outlook

By Candice Zachariahs

Aug. 6 (Bloomberg) -- The New Zealand dollar rose to its highest in almost a month against the Australian currency after the Reserve Bank of Australia signaled yesterday it may begin to lower borrowing costs.

New Zealand's currency, called the kiwi, gained against the U.S. dollar after the Federal Reserve held interest rates steady today, retaining the attraction of the Pacific nation's higher- yielding assets. The currency also rose after a private report yesterday showed that prices of commodities the nation exports rose in July.

``The currency has been underpinned by solid interest to buy the kiwi against the Aussie,'' said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. ``Over the past couple of days, we've seen an about-turn in Australian dollar sentiment.'' The Australian currency is often called the Aussie.

New Zealand's dollar gained 0.6 percent to NZ$1.2605 per Australian dollar at 8:58 a.m. in Wellington. It earlier touched NZ$1.2599, the strongest since July 10. The kiwi slid to a seven-year low against the Aussie in July, weakening to NZ$1.2969 on July 24.

The currency rose 0.4 percent to 72.67 U.S. cents, from 72.40 cents late in Asia yesterday. It bought 78.74 yen from 78.09.

The New Zealand dollar rose for the sixth day against the Australian currency after Reserve Bank of Australia Governor Glenn Stevens said yesterday that inflation may slow, allowing for a ``less restrictive stance'' on interest rates. Traders are betting that the RBA will reduce its benchmark rate by 91 basis points over the next 12 months according to a Credit Suisse Group index based on swaps trading yesterday.

Commodity Prices Rise

New Zealand's commodity export price index rose in July, led by beef, aluminum and lamb, ANZ National Bank Ltd. said yesterday. Prices rose from a year ago for eight of 13 commodities tracked by ANZ, including dairy products, which are a fifth of all exports, the bank said. Sales of commodities make up 70 percent of New Zealand's overseas shipments.

The kiwi has fallen 3.4 percent since the central bank lowered borrowing costs on July 24 and signaled further cuts were likely. A benchmark rate of 8 percent in New Zealand, compared with 2 percent in the U.S. and 0.5 percent in Japan, has made the country's assets popular with international investors seeking higher yields.

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