New Zealand’s dollar fell against its Australian counterpart from a five-year high after inflation expectations in the smaller nation topped out this quarter, damping the prospects for a rate increase.
The yield on Australia’s benchmark three-year government remained lower after minutes of the Reserve Bank’s Nov. 5 meeting showed policy makers kept the option of reducing rates if needed. Both South Pacific currencies fell against the yen as Asian stocks snapped a three-day advance.
Today’s data suggest that “maybe we are not in as inflationary an environment in New Zealand as what we thought,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. (WBC) in Singapore. Investors taking profit on short Aussie-kiwi positions has “probably been weighing on New Zealand dollar sentiment in the near term.”