N.Z. Dollar Advance on U.S. Credit-Market Concerns

The New Zealand dollar advanced to the most in five weeks on speculation the nations' assets will lure investors as losses at U.S. financial institutions deepen.

New Zealand's currency gained for a fifth after a stock index of U.S. financial companies slumped on speculation regional banks are short of capital.

New Zealand's currency increased 0.5 percent to 76.50 U.S. cents from 76.14 cents late in Asia yesterday. It earlier touched 76.69 cents, the highest since June 10. The currency bought 81.04 yen from 81.21 yen.

The New Zealand dollar strengthened after a government report showed inflation quickened at the fastest pace in 18 years in the second quarter, prompting traders to pare bets that the central bank will lower interest rates.

New Zealand's benchmark interest rate of 8.25 percent is the highest of any AAA rated nation. Reserve Bank of New Zealand Governor Alan Bollard has left borrowing costs at a record high since July last year, betting the slowing economy will curb inflation.

The consumer prices index rose 1.6 percent from the first quarter, Statistics New Zealand said in Wellington today.

Traders see a 50 percent chance the RBNZ will cut its benchmark rate by a quarter-percentage point at its next meeting on July 24, compared with 59 percent odds yesterday, according to a Credit Suisse Group index based on interest-rate swaps.

N.Z. Dollar Advance on U.S. Credit-Market Concerns

TradingEconomics.com, Bloomberg
7/14/2008 7:59:03 PM