By Ron Harui April 18 (Bloomberg) -- New Zealand’s dollar fell the most in four weeks after a government report showed inflation slowed last quarter, a sign the economy is struggling to recover. The so-called kiwi weakened versus all of its 16 major counterparts as traders cut bets on the amount of interest-rate increases from the central bank after Prime Minister John Key said domestic inflation pressures are still weak. Australia’s dollar declined for a third day versus the yen on concern Greece will be unable to avoid a default as the region’s debt crisis worsens, reducing demand for higher-yielding assets. “The weak CPI data suggest the central bank may not hike rates for a while,” said Yuji Saito, director of the foreign- exchange department at Credit Agricole Corporate and Investment Bank in Tokyo. “This seems to be causing selling of New Zealand’s dollar.” New Zealand’s currency declined 0.9 percent to 79.26 U.S. cents as of 4:18 p.m. in Sydney from last week in New York, the biggest drop since March 17. The kiwi fell 1.1 percent to 65.75 yen. Australia’s dollar weakened to $1.0555 from $1.0568, and slipped 0.4 percent to 87.55 yen. The consumer price index in New Zealand climbed 0.8 percent in the first quarter from the previous three months, when it rose 2.3 percent, the government said today in Wellington. ‘Good Shape’ Prime Minister Key told reporters that inflationary pressure remained stagnant. Finance Minister Bill English said last week that inflation won’t be a problem in coming years. “We’re not greatly concerned about” consumer-price gains, English said in a Bloomberg Television interview on April 15. “There will be some pressures there as the economy picks up, but we’re in pretty good shape on inflation.” The Reserve Bank of New Zealand will raise its benchmark rate of 2.5 percent by 53 basis points over the next 12 months, a Credit Suisse Group AG index based on swaps showed. Traders were predicting 59 basis points of increases on April 15. “As the risk-reward is squarely on the New Zealand dollar declining from here on reduced RBNZ rate hike expectations, we remain of the view that it could be an opportune time to trim some net longs,” Annette Beacher, head of Asia-Pacific research in Singapore at TD Securities, wrote in a research note today. A long position is a bet an asset will rise. Australia’s dollar fell for a third day against the yen on renewed concern Greece’s fiscal crisis will worsen. The cost of insuring Greek government debt rose to a record on April 15, with the contracts indicating investors see a more than 60 percent chance the nation will default within five years. Greece received a bailout from the European Union and the International Monetary Fund last year, and was followed by Ireland and Portugal in seeking aid. Resistance to Bailout Resistance to bailouts is growing in Europe. Support for the True Finns, whose leader Timo Soini says Finland’s taxpayers shouldn’t have helped rescue Greece or Ireland, jumped almost 15 points to 19 percent in Finland’s elections, the Justice Ministry said. The National Coalition won 20.4 percent to become Finland’s biggest party for the first time. “The final results show that the True Finn party gained a significant ground against the pro-European parties of the government coalition, raising the likelihood of the formation of an anti-European coalition government in Finland,” London-based Sara Yates and Tokyo-based Yuki Sakasai, strategists at Barclays Capital, wrote in a note today. This outcome will “likely weigh on investor sentiment.” Australia’s government bonds fell. The benchmark 10-year yield climbed one basis point to 5.60 percent, according to data compiled by Bloomberg. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, dropped seven basis points to 3.39 percent. --Editor: Rocky Swift, Nicholas Reynolds To contact the reporters on this story: Ron Harui in Singapore at rharui@bloomberg.net. To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

Source