New Zealand Dollar Falls


The New Zealand dollar fell the most in almost a month on speculation demand for higher-yielding assets will wane after Federal Reserve Chairman Ben S. Bernanke signaled he's done cutting interest rates.

The local dollar was the third-worst performer among the 16 most-traded currencies as Bernanke said yesterday the central bank is ``attentive'' to the implications of the U.S. dollar's decline for inflation. Traders added to bets the Fed has ended reducing borrowing costs, curbing demand for assets in New Zealand where economists expect rates to be lowered this year.

New Zealand's currency slid 1 percent, the most since May 8, to 77.96 U.S. cents at 12:53 p.m. in Wellington from 78.74 cents late in Asia yesterday. The currency declined to 81.93 yen from 82.11 yen.

The Fed has cut its target rate for overnight lending between banks by 3.25 percentage points since September to 2 percent. Futures on the Chicago Board of Trade show a 59 percent chance the Fed will raise rates by at least a quarter-percentage point by December, compared with 48 percent odds a month ago.

Higher U.S. rates may curb demand for currencies such as the New Zealand dollar, which has been buoyed by the nation's 8.25 percent official cash rate. New Zealand's benchmark rate is the highest of any Aaa rated nation and is 6.25 percentage points higher than the Fed's


TradingEconomics.com, Bloomberg
6/3/2008 7:37:55 PM