Kiwi 'in a dark place', headed for 1.9% weekly fall after RBNZ's dovish lurch
By Rebecca Howard
Aug. 10 (BusinessDesk) - The New Zealand dollar is headed for a 1.9 percent weekly fall against the greenback after the local central bank Thursday surprised markets by pushing out a projected rate hike for another year and saying a cut was still possible.
The kiwi traded at 66.10 US cents at 5pm versus 66.13 cents at 8am in Wellington and 66.73 cents yesterday. It traded at 67.41 cents last Friday in New York. The trade-weighted index was at 71.43 from 71.80 yesterday.
The kiwi dropped to its weakest since March 2016 after RBNZ kept the official cash rate at 1.75 percent and pushed out forecasts for a future hike by a year amid concerns about softer growth. News that Business New Zealand's performance of manufacturing index worsened further in July, dropping for the third month in a row and marking its second consecutive month below its long-run average, added to the sour mood.
"The kiwi seems to be in a bit of a dark place," said Martin Rudings, senior dealer foreign exchange at OMF. That, coupled with a rally in the greenback, will "have the kiwi on its knees." The US dollar gained ground in Asia, benefiting from euro and British pound weakness.
Rudings said there is more downside to come for the New Zealand dollar as positive US data is expected to keep rolling out. "You'd be swimming against the tide if you were doubting the performance of the US economy, at least in the short-term," he said.
The local currency traded at 89.77 Australian cents from 89.74 cents yesterday.
The kiwi fell to 4.5209 Chinese yuan from 4.5521 yuan yesterday and dropped to 73.20 yen from 73.94 yen. It declined to 51.52 British pence from 51.83 pence yesterday and decreased to 57.37 euro cents from 57.48 cents.
New Zealand's two-year swap rate fell 4 basis points to 1.99 percent while 10-year swaps were down 6 basis points to 2.86 percent.