New Zealand’s dollar strengthened to a record after a government report showed the economy grew at a faster pace than central bank had forecast, signaling the nation is recovering from a deadly earthquake in February. The so-called kiwi advanced against all of its 16 major counterparts after the larger-than-estimated gain in gross domestic product boosted speculation the Reserve Bank of New Zealand will raise interest rates this year. Australia’s dollar fell versus the yen and the greenback as Asian stocks tumbled and after a report showed expectations for home prices declined. New Zealand’s data “showed the economy probably had more momentum in it than possibly expected around the time of the earthquake,” said Grant Turley, a senior currency strategist in Sydney at Australia & New Zealand Banking Group Ltd., Australia’s third largest lender by market value. “It’s going to be another positive for the kiwi.” New Zealand’s dollar rose 0.6 percent to 84.25 U.S. cents as of 4 p.m. in Sydney from yesterday in New York, after reaching 85.07 U.S. cents, the strongest since it was freely floated in 1985. The currency also gained 0.6 percent to 66.54 yen. Australia’s dollar dropped to $1.0726 from $1.0758, after advancing to $1.0802, the highest level since May 11. It fell 0.3 percent to 84.73 yen. The MSCI Pacific Index of regional shares fell as much as 0.6 percent today. Economy’s ‘Resilience’ New Zealand’s economy expanded 0.8 percent in the three months ended March 31 from the previous quarter, the government statistics agency said in Wellington. The central bank forecast growth of 0.3 percent. Today’s report showed the “resilience” of the economy and there are signs the pace of the recovery is “picking up,” Finance Minister Bill English said in a statement. Reserve Bank Governor Alan Bollard said last month the pace and timing of increases in interest rates will be guided by the speed of the recovery. He cut the official cash rate by half a percentage point to 2.5 percent in March to boost confidence after the southern city of Christchurch was hit by an earthquake on Feb. 22 that killed more than 180 people. Six out of 11 economists surveyed by Bloomberg News today predict a quarter-point rate increase at the central bank’s meeting in December. ASB Bank Ltd. economist Jane Turner changed her forecast for a rate increase to December from January, while analysts at Goldman Sachs Group Inc.’s New Zealand unit and TD Securities Inc. are reviewing their forecasts for no change in rates until 2012. ‘Clearly Cooling’ Australia’s currency weakened to the lowest level since November against New Zealand’s on speculation a slowdown in the larger nation’s economy will prevent its central bank from raising interest rates. “You can’t discount what’s happening in Australia,” said Jonathan Cavenagh, a currency strategist in Singapore at Westpac Banking Corp., Australia’s second-largest lender. “The domestic economy is clearly cooling.” Investors should sell the Australian dollar when it trades above $1.08, he said. Home prices fell 2 percent in the second quarter and rental growth slowed to 1.3 percent, according to a National Australia Bank Ltd. survey released today. Prices are expected to decline 1.4 percent over the next year, compared with growth of 0.5 percent predicted in the bank’s March quarter survey. Traders are betting the Reserve Bank of Australia will cut its benchmark rate by 36 basis points over the next 12 months, compared with a forecast for 66 basis points of increases in New Zealand, Credit Suisse Group AG indexes show. Australia’s currency dropped 0.9 percent to NZ$1.2732 after falling to NZ$1.2679, the weakest level since Nov. 22. To contact the reporter on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net To contact the editor responsible for this story: Nicholas Reynolds at nreynolds2@bloomberg.net

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