New Zealand’s dollar touched a two- month high before a report forecast to show a slowdown in China’s inflation that may provide scope for monetary stimulus in the South Pacific nation’s second-largest export destination. The New Zealand dollar maintained three-day gains against the greenback and the yen before a report that may show retail sales in the U.S. grew for a fourth straight month, adding to signs the world’s largest economy is recovering and supporting investors’ appetite for riskier assets. Demand for the Australian dollar was limited before Spain and Italy auction debt this week amid concern Europe’s debt crisis is worsening. “If we see inflation slowing, it would give the PBOC room to reduce interest rates, which should obviously help the Chinese economy to grow in the months ahead,� said Derek Mumford, a director in Sydney at Rochford Capital, a currency- risk management company. Such stimulus from the People’s Bank of China would boost both the Australian and New Zealand dollars, he said. New Zealand’s currency rose to 79.81 U.S. cents, the highest since Nov. 9, before trading at 79.71 at 11:45 a.m. in Sydney, little changed from yesterday’s close in New York. The so-called kiwi has climbed 2.1 percent this week versus the dollar. It earlier rose to 61.35 yen, also the highest since Nov. 9, before trading at 61.30 yen, 0.1 percent above yesterday’s close. Australia’s dollar traded at $1.0312 from $1.0310 yesterday and was at 79.30 yen from 79.24. It traded at 81.09 euro cents from 81.14 yesterday, when it reached 81.20, a record high. Australia’s government bonds advanced, with the yield on 10-year notes falling two basis points, or 0.02 percentage point, to 3.76 percent. Chinese Inflation China’s consumer prices probably rose 4 percent in December from a year earlier, according to median estimate of economists surveyed by Bloomberg News before the statistics bureau releases its figures today. That would be the lowest inflation rate since September 2010. The PBOC announced a 50-basis-point cut to the reserve requirement ratio for the nation’s banks in November, the first reduction since 2008. Sales at U.S. retailers probably rose 0.3 percent in December, according to median estimate of economists surveyed by Bloomberg, before the Commerce Department publishes the data today. The Federal Reserve said in its Beige Book survey released yesterday that the U.S. economy “expanded at a modest to moderate pace� from late November through year-end while hiring was limited and housing remained stagnant. Spain will sell bonds due in 2015 and 2016 today. Italy will auction bills today and debt due in 2014 and 2018 tomorrow. -- Editors: Benjamin Purvis, Jonathan Annells To contact the reporter on this story: Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net To contact the editor responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net

Source