The New Zealand dollar declined against most of its 16 major peers after a report showed inflation slowed by more than economists forecast. The so-called kiwi snapped a three-day advance against its U.S. counterpart on speculation the Reserve Bank of New Zealand will signal this week a willingness to keep its benchmark interest rate at record low for longer. The Australian dollar traded 0.2 percent from a six-week high after central bank Deputy Governor Ric Battellino signaled no urgency to cut the developed world’s highest borrowing costs. “This is quite a negative surprise for the kiwi currency, and it’s quite a significant negative surprise to the Reserve Bank,” said Imre Speizer, a strategist in Auckland at Westpac Banking Corp., Australia’s second-largest lender. “It has a downward risk to their interest-rate track and interest rates in the short end should fall on this, which should weigh on the kiwi dollar.” The New Zealand dollar fell 0.3 percent to 80.49 U.S. cents as of 3:18 p.m. Sydney time. It slid 0.3 percent to 61.26 yen. Australia’s dollar was little changed at $1.0478 after yesterday reaching $1.0501, the most since Sept. 9. The so-called Aussie traded at 79.72 yen from 79.71. New Zealand’s consumer prices gained 0.4 percent in the third quarter from the second, when they advanced 1 percent, Statistics New Zealand said in Wellington today. The median estimate in a Bloomberg News survey of 16 economists was for a 0.7 percent increase. New Zealand Inflation “No doubt that RBNZ will remain on hold for some time,” Roland Randall, an economist at TD Securities Inc. in Singapore, wrote in a research note today. “Now the RBNZ could choose to dwell on weaker domestic activity and price signals, as well as risks from offshore; and that would make for a more dovish statement than it delivered in September.” All 17 economists surveyed by Bloomberg expect New Zealand’s central bank to keep its target rate unchanged at 2.5 percent at its meeting on Oct. 27. New Zealand’s two-year overnight-index swap rate, an indication of what traders expect the central bank’s key interest rate will average during the period, was at 2.89 percent today, compared with a high of 3.29 percent on Oct. 11. RBA Rates “It remains to be seen how the Australian economy will respond to the recent financial volatility and the consequent fall in confidence and the loss of wealth,” RBA’s Battellino said in prepared remarks for a speech today in Sydney. The RBA will hold its rate-policy meeting on Nov. 1. Australian government bonds fell, sending three-year yields to the highest in more than two months. The yield on the 6.25 percent note due June 2014 rose to as high as 3.946 percent, the most since Aug. 16, before trading at 3.91 percent. The extra yield offered by Australia’s two-year bonds over similar-maturity U.S. Treasuries climbed toward the highest level in more than two months. Currencies are “following an improvement in risk appetite,” said Sue Trinh, a senior strategist at Royal Bank of Canada in Hong Kong. “As the market pares bets for an imminent RBA rate cut, that certainly does provide a foundation for the Aussie to rally.” The Australian dollar may rise as high as $1.08, Trinh said, without specifying a time frame. To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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