NZ dollar pares losses as markets bet on global rates going lower
By Rebecca Howard
Aug. 8 (BusinessDesk) - The New Zealand dollar pared some of yesterday's steep losses as other central banks also cut rates, adding to the view that rates are going lower globally.
The kiwi was trading at 64.55 US cents at 7:50 am in Wellington versus 63.95 cents at 5pm in Wellington. The trade-weighted index was at 71.77 points from 71.23.
The kiwi tumbled to a low of 63.76 cents yesterday after the Reserve Bank of New Zealand slashed rates by 50 basis points to 1.0 percent, taking markets by surprise.
Overnight, the central bank of India and Thailand also cut rates.
According to Capital Economics, the Reserve Bank of India delivered a slightly larger-than-expected cut of 35 basis points rather than the usual 25 points. Meanwhile, the Bank of Thailand’s surprise cut in the policy rate from 1.75 percent to 1.50 percent was driven by concerns about the strength of the currency and the worsening outlook for the economy.
While the kiwi remains under pressure, it “spent most of the night grinding higher” as investors wagered the rest of the central banking world may follow its lead, Kiwibank trader Mike Shirley said.
Both the European Central Bank and the US Federal Reserve have signalled more easing on the horizon. The Reserve Bank of Australia also left the door open to more cuts this week.
The Australian dollar fell to its lowest level against the greenback in more than 10 years. The Australian dollar was trading at 67.62 US cents at 7:50 am in Wellington. It touched a low of 66.75 cents overnight.
“The RBNZ decision gives markets a reason to ratchet up expectations” for further cuts from the RBNZ, ANZ Bank FX/rates strategist Sandeep Parekh said.
The kiwi was trading at 95.40 Australian cents from 95.46, at 53.15 British pence from 52.53, at 57.58 euro cents from 57.03, at 68.53 yen from 67.87 and at 4.5560 yuan from 4.5056.