New Zealand Dollar Slide on Intervention Comments


The New Zealand dollar slid to near a four-month low after U.S. Treasury Secretary Henry Paulson said he would ``never'' rule out currency intervention.

The currency also weakened as Federal Reserve Chairman Ben S. Bernanke said central bankers will ``strongly resist'' any waning of public confidence in stable prices, adding to speculation U.S. policy makers will raise interest rates. New York Fed President Timothy Geithner said the bank is ``paying very close attention'' to the U.S. dollar.

New Zealand's currency fell 1.4 percent to 75.65 U.S. cents, after earlier dropping to 75.51 cents, near a four-month low of 75.39 cents reached May 16.

Kiwi snapped a two-day winning run against the U.S. dollar. The currency has gained 7.4 percent against the greenback since Sept. 18 when the Fed began to lower borrowing costs. The Fed cut rates to 2 percent in April.

The New Zealand dollar traded at 79.67 Australian cents compared with 79.71 cents late yesterday.

Traders increased bets Fed policy makers will raise interest rates this year. Fed funds futures on the Chicago Board of Trade show a 32 percent chance policy makers will increase the target lending rate by at least a quarter-percentage point at their August meeting, compared with 9 percent odds yesterday.

Rising U.S. borrowing costs may curb demand for assets for the two South Pacific nations. New Zealand's benchmark rate is 8.25 percent and Australia's is 7.25 percent, compared with the Fed's target rate of 2 percent.


TradingEconomics.com, Bloomberg
6/10/2008 7:30:14 AM