The New Zealand dollar fell against all its major counterparts after Finance Minister Bill English told parliament it was “possible” the nation’s economy slipped into recession in the second half of last year. The so-called Aussie traded less than 1 percent below this year’s high before a report tomorrow that is forecast to show Australia had its longest stretch of jobs growth since 2007. The currency was also bolstered after most stock markets in the U.S. and Europe rose on confidence the global recovery will strengthen even after China increased interest rates yesterday. “English’s comments continue a tried and tested tradition of Kiwi leaders trying to talk the New Zealand dollar down,” said Adrian Foster, Hong Kong-based head of financial-market research for Asia at Rabobank Groep NV. “The U.S. is recovering but not running away; Europe is doing reasonably well, as is China, which is tightening but not clamping down. The Aussie will continue around parity.” New Zealand’s dollar fell 0.4 percent to NZ$1.3134 per Aussie as of 4:09 p.m. in Sydney. It weakened to 77.15 U.S. cents from 77.51 cents in New York yesterday and declined 0.3 percent to 63.61 yen. Australia’s currency fetched $1.0132 from $1.0146 yesterday and $1.0228 on Jan. 3. It bought 83.53 yen from 83.57 in New York yesterday, when it reached 83.73, the most since May 13. U.S. stocks rose yesterday, lifting the Dow Jones Industrial Average to its longest winning streak since July. The MSCI World Index has climbed 5.1 percent this year. The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, was little changed. ‘Risk Appetite’ “Global risk appetite remains strong,” said Imre Speizer, a market strategist in Wellington at Westpac Banking Corp., Australia’s second-largest lender. “You can see more upward momentum in Aussie toward the December high.” The Aussie reached $1.0256 on Dec. 31, the most since exchange controls ended in 1983. New Zealand’s currency fell after English said that the nation’s recovery is going to have some challenges. The economy may have contracted in the fourth quarter of 2010, entering its second recession in two years, he said. Gross domestic product in New Zealand shrank 0.2 percent in the three months through Sept. 30, and a report last week showing a decline in fourth-quarter employment added to evidence of a second-straight quarterly contraction. Australian Jobs Australian employers added 17,500 jobs in January, an 11th- straight month of gains, according to economists surveyed by Bloomberg News before the statistics bureau reports the data tomorrow. The unemployment rate was unchanged at 5 percent, the lowest since January 2009, the survey shows. Benchmark interest rates are 4.75 percent in Australia and 3 percent in New Zealand, compared with as low as zero in the U.S. and Japan, attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits. Australian bond futures fell, with the 10-year contract for March delivery at 94.225 on the Sydney Futures Exchange from 94.245 yesterday. The implied yield on the futures rose two basis points to 5.775 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, was little changed at 3.835 percent. 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.

Source