New Zealand's currency, known as the kiwi, fell for a fourth day versus Australia's on prospects that an RBNZ rate reduction will diminish the allure of higher-yielding assets on offer in the South Pacific nation. The yield premium on three- year Australian government bonds over similar-maturity New Zealand debt widened to 29 basis points from 28 points yesterday.
New Zealand's dollar fell to NZ$1.2851 per Australian dollar, the lowest since December 2000, before trading at NZ$1.2813 as of 6:30 p.m. in Wellington from NZ$1.2805 late in Asia yesterday. The currency dropped to 76.12 U.S. cents from 76.27 cents. It weakened to 81.11 yen from 81.37 yen.
Australia's dollar traded at 97.54 U.S. cents, from 97.66 cents late in Asia yesterday. It reached 98.49 cents on July 16, the highest level since 1983. The currency traded at 103.94 yen from 104.21 yen.
The kiwi extended this month's decline against Australia's dollar to 1.9 percent as investors increased bets over the past month that the RBNZ will reduce rates for the first time since 2003 when it meets July 24.
Australian dollar traded near a 25-year high against the U.S. currency as gold, the nation's third-most valuable commodity export, climbed as rising energy prices boosted demand for the metal as a hedge against inflation.
The price of gold rose 1.1 percent after crude oil advanced 1.7 percent yesterday. Exports of raw materials contribute about 17 percent to Australia's economy.
The Aussie was also bolstered before an inflation report tomorrow that may support the case for the Reserve Bank of Australia keeping rates at a 12-year high.
Australia's consumer price index rose 1.3 percent in the second quarter for an annual gain of 4.3 percent, up from 4.2 percent in the previous three months, according to the median estimate of 22 economists surveyed by Bloomberg News. The Bureau of Statistics releases the data at 11:30 a.m. in Sydney tomorrow.
The benchmark interest rate is 7.25 percent in Australia and 8.25 percent in New Zealand. There is a zero percent chance of an RBA rate move at its next meeting on Aug. 5, according to a Credit Suisse Group index based on interest-rate swaps.