NZ dollar holds at lower levels after RBNZ rules out hikes

NZ dollar holds at lower levels after McDermott takes rate hikes off the table

By Tina Morrison

April 24 (BusinessDesk) - The New Zealand dollar held at lower levels after its sudden decline yesterday following Reserve Bank assistant governor John McDermott's comments ruling out interest rate rises.

The kiwi was at 75.90 US cents at 8am in Wellington, from 75.81 cents at 5pm yesterday and 76.23 cents before McDermott's comments in a speech yesterday. The trade-weighted index, the broader measure of the currency favoured by the Reserve Bank, was at 79.05 from 79.14 yesterday, retreating from a nine-month high of 80.53 earlier this week.

The New Zealand dollar dropped yesterday after McDermott told a business lunch in Hamilton that the Reserve Bank isn’t considering an increase in interest rates at present and is watching for any signs of weakening demand and domestic inflationary pressures that could warrant a rate cut. That contrasts with previous Reserve Bank comments that future interest rate moves could be "either up or down", and prompted traders to take a more dovish stance ahead of next week's official cash rate review.

"The New Zealand dollar lost ground yesterday as markets interpreted the RBNZ as shifting from a neutral bias to a neutral bias with downside risks," ANZ Bank New Zealand senior economist Mark Smith and senior FX strategist Sam Tuck said in a note. "Markets consolidated on that theme overnight."

The local currency is likely to trade between 75.50 US cents and 76.40 cents today, ANZ said.

The New Zealand dollar slipped to 97.52 Australian cents from 97.69 cents yesterday following a string of more positive Australian data, and McDermott's emphasis of New Zealand's downside risks.

The local currency fell to 70.09 euro cents from 70.82 cents yesterday, edged lower to 50.39 British pence from 50.44 pence and weakened to 90.70 yen from 90.77 yen.

(BusinessDesk)

© Scoop Media