By Candice Zachariahs Sept. 16 (Bloomberg) -- The New Zealand dollar fell for a second day after the nation’s central bank left interest rates unchanged and said further increases to the benchmark are likely to be “more moderate” than previously projected. The so-called kiwi slid against the yen as Reserve Bank Governor Alan Bollard said policy makers could “look through” any temporary price gains in the aftermath of the nation’s worst earthquake in 80 years. Australia’s dollar fell the most in a week against the yen on speculation Japanese exporters used yesterday’s drop in the domestic currency to buy it and bring home overseas earnings before the end of the fiscal first half. “The statement was more dovish than we or the market had expected,” said Imre Speizer, a market strategist in Wellington at Westpac Banking Corp., Australia’s second-largest lender. “They’ve lowered their interest-rate outlook by 150 basis points, which is massive.” New Zealand’s dollar fell 0.9 percent to 72.49 U.S. cents as of 2:55 p.m. in Sydney, compared with yesterday in New York. It may drop to 70 U.S. cents over the next couple of weeks, Speizer said. The kiwi lost 1.4 percent to 61.87 yen. Australia’s dollar traded at 93.58 U.S. cents from 93.82 cents and reached 94.58 cents on Sept. 14, the strongest level since July 2008. It declined 0.7 percent to 79.87 yen. Bollard today left the overnight cash rate at 3 percent, which compares with 4.5 percent in Australia and close to zero in Japan and the U.S. ‘More Moderate’ “While the global and domestic economies continue to recover, the outlook has weakened since our June statement,” Bollard said today. Further increases in the key rate are “likely to be more moderate than was projected.” The central bank forecast the three-month bank bill rate, at which lenders extend credit to each other, will rise to 4.5 percent by September 2012 from a June projection of 6 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating interest payments, dropped 12 basis points to 3.75 percent, after touching its lowest since Sept. 2. “The market has responded very aggressively to the new 90- day bill track projections,” said Gavin Stacey, an interest- rate strategist at Barclays Capital in Sydney. “Markets are rallying too far, and at some point our inclination would be to position for more rate hikes than the market will have likely priced in over a couple of days.” Trade Recommendation Barclays recommends investors look for an opportunity in the next week or so to pay the New Zealand two-year swap rate three months forward relative to the Australian equivalent. The bank also advised betting on gains in the kiwi against Australia’s currency from near the NZ$1.30 level. New Zealand’s dollar fell to NZ$1.2906 per Aussie from NZ$1.2824 yesterday. Australia’s currency held near a two-year high against the greenback before a report economists forecast will show U.S. initial jobless claims rose to 459,000 last week from 451,000 a week earlier. To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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