By Candice Zachariahs March 5 (Bloomberg) -- The New Zealand dollar traded near a one-week low, heading for the worst performance among its 16 major counterparts this week, on speculation a slowing economy will prompt its central bank to keep rates at a record low. Australia’s currency ended a three-day slide versus the yen on prospects the Bank of Japan may increase stimulus measures to curb deflation, boosting demand for higher-yielding currencies. New Zealand’s dollar was near its weakest since 2000 against the Aussie and headed for its biggest weekly loss since October before a March 11 meeting when Reserve Bank of New Zealand Governor Alan Bollard is expected to leave rates on hold. “Commodity currencies are holding up quite nicely with the exception of the kiwi,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. “Bollard will maintain his tone and give a fairly mixed report card on the economy and that will again lend itself to selling against things like the Aussie.” New Zealand’s dollar traded at 68.78 U.S. cents as of 4:36 p.m. in Sydney after yesterday falling as low as 68.52, the least since Feb. 25. It has dropped 1.5 percent this week. The currency bought 61.40 yen from 62.10 on Feb. 26. The so-called kiwi yesterday fell as low as NZ$1.3126 versus Australia’s currency, the least since 2000, and has lost 2.1 percent this week. Australia’s currency bought 90.07 U.S. cents from 90.01 cents in New York yesterday and 89.54 cents last week. It touched 90.86 cents on March 3, the most since Jan. 25. The currency rose 0.4 percent to 80.42 yen. Yen-borrowing costs for three months fell below the U.S. dollar rate for the first time since August in London. The central bank will likely discuss more monetary easing measures, the Nikkei English News said, without citing anyone. Bank of Japan, U.S. Jobs “The Bank of Japan may be talking about further stimulus packages effectively devaluing the strength of the yen,” said Derek Mumford, a Sydney-based senior consultant at HiFX, a foreign exchange risk management firm. “The interest-rate differential is only going to widen in the short- to medium- term,” boosting demand for higher-yielding currencies, he said. The Australian and New Zealand currencies’ gains versus the greenback were limited after the Labor Department yesterday said U.S. jobless benefit claims dropped and on speculation a report today will show employers last month cut fewer jobs than economists estimated. “Expectations are pretty downbeat now for the payrolls number, looking for an over 60,000 loss, so there’s a low hurdle there for the data to surprise on the topside,” Gibbs said. ‘Historical Extremes’ The Aussie may fall about 7 percent against New Zealand’s dollar after reaching “historical extremes,” David Forrester, a Singapore-based currency strategist at Barclays Capital, wrote in a note to clients today. The Aussie will drop to NZ$1.22 over three months, he said. Australia’s dollar will weaken as its central bank slows the pace of interest-rate increases at the same time as rising inflation expectations spur the Reserve Bank of New Zealand to temper its dovish tone, Barclays said. Australia’s “data would have to begin to imply significantly above-trend growth in order to accelerate the RBA’s rate-hiking cycle,” Forrester wrote. “We think the RBNZ could start with a 50 basis point hike and that this could begin to be factored in next week.” Australian government bonds declined, pushing up the yield on 10-year notes by 0.01 percentage point to 5.47 percent, according to data compiled by Bloomberg. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was little changed at 4.09 percent. --Editors: Garfield Reynolds, Rocky Swift. %NZD %AUD %USD %EUR %JPY 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. Related Articles Sponsored Links

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