Nov. 5 (Bloomberg) -- New Zealand’s dollar weakened for the first time in four days against its U.S. counterpart as a report showed the jobless rate climbed in the third quarter and the central bank governor said a strengthening currency will slow the nation’s economic recovery.

The currency, nicknamed the kiwi, tumbled against all 16 of the most-traded currencies tracked by Bloomberg. New Zealand’s unemployment rate rose to 6.5 percent, a nine-year high, from 6 percent in the second quarter as employers cut twice as many workers as economists forecast.

“The numbers are genuinely weak and weaker than both the market and the Reserve Bank of New Zealand had factored in, and it certainly justifies a lower kiwi,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “There’s certainly no reason based on these numbers for the central bank to bring forward its tightening cycle.”

New Zealand’s dollar declined 0.5 percent to 72.07 U.S. cents at 2:23 p.m. in New York, from 72.42 yesterday. The kiwi dropped 0.5 percent to 65.35 yen.

Australia’s dollar was little changed at 90.94 U.S. cents, compared with 90.99 cents yesterday. The Aussie traded at 82.46 yen, compared with 82.55 yesterday.

Employment in New Zealand dropped 0.8 percent, or about 17,000 jobs, in the third quarter, according to a report from Statistics New Zealand. Economists in a Bloomberg survey forecast a 0.3 percent decline.

The number of people out of work rose by 12,000 from the second quarter to a 15-year high of 150,000. About 2.3 million of New Zealand’s 4.4 million people are in the workforce, and a record number have stopped seeking jobs.

‘More Vulnerable’

“New Zealand has had a recession, and the pick-up is slower and more vulnerable” than Australia’s, Reserve Bank of New Zealand Governor Alan Bollard said in an e-mailed statement based on a speech in Auckland. It’s “a difference financial markets do not appear to appreciate.”

New Zealand’s economy expanded 0.1 percent in the second quarter, ending the nation’s worst recession in three decades.

The kiwi has been the top performer against the greenback over the past six months among the 16 most-traded currencies tracked by Bloomberg as traders bet New Zealand’s central bank will raise interest rates. Australia’s dollar put in the third- best performance.

Rate-Boost Bets

Swaps traders are betting Bollard will increase the official cash rate by about 2 percentage points over the next 12 months, according to a Credit Suisse index. A separate index shows bets for 164 basis points in increases from the Reserve Bank of Australia, which has increased its target rate 50 basis points since October.

New Zealand’s two-year swap rate, a fixed payment made to receive floating rates that is sensitive to interest-rate expectations, fell to 4.44 percent from 4.46 percent yesterday.

Australian government bonds fell, pushing the yield on the benchmark 10-year security up five basis points, or 0.05 percentage point, to 3.52 percent.

Benchmark interest rates are 3.5 percent in Australia and 2.5 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.

To contact the reporters on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Matt Townsend in New York at mtownsend9@bloomberg.net

Last Updated: November 5, 2009 14:28 EST