By Yasuhiko Seki Sept. 21 (Bloomberg) -- New Zealand’s dollar fell against all its major counterparts on speculation the Federal Reserve will today refrain from taking further measures to spur growth, damping demand for higher-yielding assets. The so-called kiwi also weakened as traders cut bets the Reserve Bank of New Zealand will raise interest rates due to the impact of last month’s earthquake. Australia’s dollar rose for a second day versus New Zealand’s on speculation the larger nation’s central bank is more likely to increase borrowing costs than its smaller neighbor. “The market has priced in expectations for additional easing by the Fed too fast and too much,” said Kazumasa Yamaoka, a chief strategist at investment advisory company GCI Research Institute Ltd. in Tokyo. Investors may end bets the greenback will weaken against higher-yielding currencies if the Fed doesn’t announce any new measures to cap interest rates, he said. New Zealand’s dollar dropped to 72.62 U.S. cents as of 4:57 p.m. in Sydney from 73.07 yesterday in New York. The currency fell 0.8 percent to 62.10 yen, and slid 0.3 percent to NZ$1.3001 per Australian dollar. Australia’s currency traded at 94.51 U.S. cents from 94.72 cents, and lost 0.5 percent to 80.73 yen. The Fed’s Open Market Committee will hold off from increasing purchases of government debt, according to 60 of 64 analysts surveyed by Bloomberg. Fifty-four of 63 economists said the Fed will leave unchanged a sentence saying high unemployment and low inflation warrant “exceptionally low” rates for an “extended period.” ‘Do More’ “Bernanke has indicated a willingness for the Fed to do more to support economic growth, but it’s really conditional on a much more substantial deterioration in the economic outlook,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. New Zealand’s dollar also declined as investors lowered bets that the Reserve Bank will raise interest rates next month. The RBNZ left its overnight cash rate unchanged on Sept. 16 after raising it in June and July. The central bank cut its building and inflation forecasts and said the Sept. 4 earthquake in the city of Christchurch may reduce growth by 0.3 percentage point this quarter. There is a 2 percent chance the Reserve Bank will boost rates at its next meeting on Oct. 28, down from 4 percent last month, according to an index compiled by Credit Suisse AG. Weak Fundamentals “Local fundamentals will not warrant a significantly stronger New Zealand dollar,” said Khoon Goh, head of market economics and strategy in Wellington at ANZ National Bank Ltd. Australia’s dollar gained versus the kiwi after minutes of this month’s Reserve Bank of Australia meeting showed policy makers said they may need to raise borrowing costs if their forecast for economic growth is realized. Australian policy makers “considered that if the central scenario came to pass it was likely that higher interest rates would be required, at some point,” according to minutes of the Reserve Bank’s Sept. 7 meeting released today in Sydney. Investors have increased bets this month the RBA will resume raising rates as early as October. The bank left borrowing costs unchanged for a fourth month two weeks ago, citing concern about the outlook for the U.S. economy and government debt among some European countries. “The central scenario remained for the Australian economy to grow at trend pace, or a bit above, over the next few years,” today’s minutes showed. There is a 44 percent chance Australia’s central bank will boost rates next month, according to another Credit Suisse index. “Should the RBA hike rates over coming months, then a rise to 96.50 cents is on the cards,” said John Kyriakopoulos, head of currency strategy in Sydney at National Australia Bank Ltd. To contact the reporter on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net.

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