New Zealand’s dollar held a three- day gain versus the U.S. currency as a recovery in Asian stocks supported demand for higher-yielding assets. The so-called kiwi erased a 0.5 percent drop earlier today amid speculation the central bank will raise borrowing costs. The Australian dollar depreciated against most of its 16 major peers after minutes of the central bank’s Aug. 2 meeting showed policy makers kept interest rates unchanged on concern that turmoil in financial markets could slow global economic growth. “As long as equity markets continue to stabilize or recover,” the kiwi will appreciate, said Khoon Goh, head of market economics and strategy at ANZ National Bank Ltd. in Wellington. “Our house view is we’re not going to see a double- dip recession.” New Zealand’s dollar bought 83.27 U.S. cents as of 12:43 p.m. in Sydney from 83.28 in New York yesterday. It dropped earlier to as low as 82.89. The Australian dollar traded at $1.0496 from $1.0507. The MSCI Asia Pacific Index of regional shares climbed 0.9 percent, paring its loss so far this month to 8.3 percent. The Standard & Poor’s 500 Index rallied 2.2 percent in New York. New Zealand’s central bank may increase its key interest rate by 61 basis points over the next 12 months, according to a Credit Suisse Group AG index based on swaps, compared with a decrease of 20 basis points signaled on March 2. Rate Outlook Traders see a 100 percent chance the Reserve Bank of Australia will cut the overnight cash-rate target by 50 basis points by October, contracts on the Sydney Futures Exchange show. “The case against tightening at this meeting was that the downside risks to demand had probably increased, as a result of the acute uncertainty in global financial markets,” the minutes released today by the RBA showed. “This in turn could weaken the outlook for demand relative to the central forecast and, over the medium term, dampen the inflation outlook.” Governor Glenn Stevens held the overnight cash rate target at 4.75 percent for a record eighth-straight meeting on Aug. 2. “If turmoil continues, it could actually temper inflation over time,” easing pressure on the RBA to raise interest rates, said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “I see the Aussie going back to parity again” versus the U.S. currency, he said. To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net. To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.

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