NZ dollar little changed after RBNZ signals rate cuts

Friday 22 July 2016 08:30 AM

NZ dollar little changed below 70 US cts after RBNZ signals rate cuts

By Paul McBeth

July 22 (BusinessDesk) - The New Zealand dollar was little changed below 70 US cents after the Reserve Bank signalled rate cuts were needed to drag down a strong currency which has restricted imported inflation in the economy.

The kiwi traded at 69.95 US cents at 8am in Wellington from 69.88 cents late yesterday. The trade-weighted index was almost unchanged at 75 from 74.97.

Traders are pricing in about a 94 percent chance governor Graeme Wheeler will cut the official cash rate to 2 percent next month after the Reserve Bank yesterday said more easing was likely with the currency above the bank's expectations, making it difficult to meet the mandated target of keeping annual inflation between 1 percent and 3 percent. The consumers price index has been below the bottom of the band for seven quarters.

"If the recent decline is to be sustained, the bank will need to deliver two more OCR cuts in the not too distant future (given this is now priced)," Bank of New Zealand senior market strategist Kymberly Martin said in a note. "Further downside to the NZD will likely need to be driven by global forces."

The kiwi dropped to 73.97 yen from 74.84 yesterday after Bank of Japan governor Haruhiko Kuroda ruled out 'helicopter money' - where a central bank buys perpetual bonds with no maturity date - as a means to stir inflation in the world's third-biggest economy.

The local currency was little changed at 63.43 euro cents from 63.34 cents after the European Central Bank left monetary policy unchanged, and president Mario Draghi said he was still willing and ready to act in response to the UK's vote to leave the European Union if need be. The kiwi traded at 52.96 British pence from 52.80 pence.

The New Zealand dollar was almost unchanged at 93.29 Australian cents from 93.30 cents yesterday and edged up to 4.6694 Chinese yuan from 4.6620 yuan.

(BusinessDesk)

ends

© Scoop Media