Consumer confidence dropped to the lowest in almost two years in April, adding to signs domestic demand and economic growth will slow, according to a Colmar Brunton poll for Television New Zealand Ltd. Ten of 16 economists surveyed by Bloomberg News last week expect Reserve Bank Governor Alan Bollard will cut rates in the fourth quarter.
New Zealand's currency bought 78.98 U.S. cents at 9:25 a.m. in Wellington from 79 cents in late New York trading on April 18.
Finance Minister Michael Cullen last week said the outlook for the economy is ``challenging.'' Economic growth will slow to 1.6 percent this year from 3.1 percent in 2007, according to the median forecast of 12 economists surveyed by Bloomberg. Some analysts expect growth as slow as 1.1 percent this year.
Traders expect 93 basis points of rate cuts over the next year, according to an index calculated by Credit Suisse based on overnight swaps. A basis point is 0.01 percentage points.
New Zealand's benchmark rate is 7.75 percent higher than Japan's, making the currency a favorite for the so-called carry trade where investors borrow cheaply to invest in nations with higher yields. The currency rose to 82.1 yen today, matching a five-week high.