July 16 (Bloomberg) -- New Zealand’s dollar fell for the first time in two weeks after a government report showed consumer prices rose at a slower pace than economists forecast, easing pressure on the central bank to raise interest rates. The so-called kiwi weakened against all 16 of its major counterparts as swaps traders cut their predictions for the size of rates increases by central bank Governor Alan Bollard over the next 12 months. Australia’s dollar weakened for a second day as signs of slowing growth in China, the South Pacific nation’s largest trading partner, damped demand. The inflation data “buys the Reserve Bank a bit more time and that’s why we’re seeing this reaction in the kiwi,” said Khoon Goh, a senior markets economist at ANZ National Bank Ltd. in Wellington. “The market should start to focus on the fact that some of the domestic momentum in the New Zealand economy seems to be easing.” New Zealand’s dollar fell to 71.85 U.S. cents as of 5:03 p.m. in Sydney from 72.97 cents in New York yesterday, its first decline since July 2. The currency dropped 1.7 percent to 62.70 yen. The so-called Aussie slid 0.8 percent to 87.72 U.S. cents, and lost 0.9 percent to 76.548 yen. The kiwi pared its second weekly gain after Statistics New Zealand said consumer prices rose 0.3 percent last quarter from the previous three months, less than the 0.4 percent gain forecast by economists. Rate Bets Reserve Bank of New Zealand Governor Bollard raised the official cash rate to 2.75 percent on June 10, the first increase since 2007. Traders are betting he will boost the benchmark by 1.22 percentage points over the next 12 months, after wagering on a 1.30 percentage point advance at the start of the week, according to a Credit Suisse Group AG index. The New Zealand and Australian dollars also weakened as Asian stocks dropped, damping demand for higher-yielding assets. The MSCI Asia Pacific Index of shares fell 1 percent, a second day of losses. “We have seen a fairly indifferent performance on Asian equity markets which has taken some buying momentum away from the Australian dollar,” Tim Waterer, a foreign-exchange dealer at CMC Markets in Sydney, wrote in a note. “Market sentiment remains fickle which does lend itself to higher volatility trading for the Aussie in the near-term.” U.S. household sentiment deteriorated in July and consumer prices fell for a third month in June, according to economists surveyed by Bloomberg before reports today. China’s economic growth slowed to 10.3 percent last quarter, from 11.9 percent in the prior three months, the statistics bureau said yesterday. The New Zealand dollar still headed for a weekly gain against the U.S. currency, adding 1.1 percent. Australian government bonds fell. The yield on the benchmark 10-year note rose two basis points to 5.12 percent, according to data compiled by Bloomberg. The 4.5 percent bond due April 2020 dropped 0.11, or A$1.10 per A$1,000 face amount, to 95.30. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, fell five basis points to 4.19 percent. --Editors: Nicholas Reynolds, Rocky Swift To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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