New Zealand’s dollar fell for a third day as the central bank said deteriorating growth prospects will slow the pace of future interest-rate increases after it raised the benchmark for a second month. The currency weakened against all 16 of its major counterparts after Governor Alan Bollard said the “pace and extent” of future rate increases would be more moderate than projections he made in June. The Australian dollar rose for the first time in three days versus the greenback as U.S. equity futures gained and Australia’s benchmark stock index pared declines, boosting demand for higher-yielding assets. Bollard’s “statement is more dovish than in June and the market largely expected it to be unchanged,” said Imre Speizer, a market strategist in Wellington at Westpac Banking Corp., Australia’s second-largest lender. “The kiwi dollar is being sold on that.” New Zealand’s dollar dropped 0.3 percent to 72.48 U.S. cents as of 4:20 p.m. in Sydney from yesterday in New York, and declined 0.5 percent to 63.27 yen. Australia’s currency rose 0.5 percent to 89.75 cents, after earlier falling to 89.06 cents, the lowest since July 23. It gained 0.3 percent to 78.27 yen. New Zealand’s benchmark rate of 3 percent and Australia’s 4.5 percent, compare with levels of 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits. Rate ‘Pause’ “We’re likely to see further hikes in the next few meetings before consideration of a pause,” said Speizer, who expects to so-called kiwi to find buyers toward 71.60 cents. New Zealand’s currency has gained 4.7 percent against the dollar in the past month as investors bet the central bank will keep raising interest rates. Swaps traders expect the Reserve Bank of New Zealand to raise its key rate by 87 basis points over the next year, a Credit Suisse AG index shows. The currency’s recent gains are “inconsistent with the softening in New Zealand’s economic outlook and moderation in our export commodity prices,” Bollard said. New Zealand posted a trade surplus of NZ$276 million ($199 million) in June, Statistics New Zealand said today, less than the NZ$368 million forecast in a Bloomberg survey. Exports fell 9.8 percent to NZ$3.78 billion from a record in May. ‘Higher Growth’ The RBNZ “did talk about higher growth for their trading partners than what they had forecast, but they see risks to that growth,” said Alex Sinton, a senior dealer at ANZ National Bank Ltd. in Auckland. Policy makers “are waiting for further signs to make sure they progress in the right direction.” New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell 10 basis points to 4.07 percent. Australia’s dollar erased an earlier decline as U.S. equity futures signaled stocks will end two days of losses. The 120-day correlation between the Australian dollar and Standard & Poor’s 500 futures was 0.85 today. A reading of 1 would mean they move in lockstep. “The correlation between the U.S. equity market, our local benchmark index and the Aussie dollar is pretty strong,” said David Taylor, a market analyst at CMC Markets Ltd. in Sydney. “Equities turned a bit of a corner and the Aussie has probably followed equity markets up.” Australian bond futures were little changed with the 10- year contract for September delivery at 94.76 on the Sydney Futures Exchange from 94.79 yesterday. The implied yield was 5.24 percent.

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