SYDNEY (Reuters) - The New Zealand dollar slipped on Tuesday, as traders wagered on a higher probability of a rate cut this week after a central bank survey showed the country's near-term inflation expectations eased in the fourth quarter.
A reduction to the official cash rate by the Reserve Bank of New Zealand (RBNZ) will add pressure on its Australian counterpart to ease too. The RBNZ last cut rates in August by a larger-than-expected 50 basis points.
The New Zealand dollar <NZD=D4> skidded 0.4% to $0.6335 after the RBNZ's quarterly survey of expectations showed business managers forecast annual inflation averaging 1.66% over the coming year, down from 1.71% in the previous survey in August.
The one-month overnight cash rate <NZDOIS=> slipped to 0.795% after the survey, from 0.839% on Monday to now imply a 77% chance of a 25 basis point cut in November.
The kiwi has been trading in a tight band in the past few days. A break below $0.6323 will see it tumbling to $0.6241 and then to $0.6204.
The Australian dollar <AUD=D4> followed its New Zealand cousin lower. It was last down 0.2% at $0.6836, on course for its third straight session of losses.
Jarrod Kerr, chief economist at Kiwibank, said Tuesday's weak figures suggest August's outsized 50 basis point cut to the official cash rate (OCR) had "failed to turn the inflation expectations dial."
"And this adds further weight to our view that the RBNZ should cut the OCR tomorrow to 75 basis points," Kerr added.
Twelve out of 15 analysts polled by Reuters expect the RBNZ to cut rates on Wednesday from the current 1%. All 13 economists who forecast beyond this week's meeting expected the central bank to cut rates by at least 25 basis points by the end of next year.
The Reserve Bank of Australia (RBA) has cut its benchmark rate three times to 0.75% since June this year and economists widely expect at least one more easing by early 2020 to revive growth and inflation.
Apart from the RBNZ rate decision, investor attention will also be on a closely-watched survey of consumer sentiment and quarterly wage price inflation data both on Wednesday.
Earlier, a survey of businesses showed confidence and conditions in the corporate sector remained subdued despite policy stimulus so far.
New Zealand government bonds <0#NZTSY=> gained, sending yields about 2.5 basis points lower across the curve.
Australian government bond futures rose, with the three-year bond contract <YTTc1> up 1 tick at 99.140. The 10-year contract <YTCc1> added 1.5 ticks to 98.715.
(Editing by Jacqueline Wong)
