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New Zealand Dollar (NZD) Broadly Softer after RBNZ Policy Statement

Published: 30 Apr at 2 PM Tags: Pound Sterling, Euro Exchange Rate, Dollar Exchange Rate, Australian Dollar Exchange Rate, New Zealand Dollar Exchange Rate, Currency Exchange, Euro Crisis, Inflation,

During the Australasian session the New Zealand Dollar fell against a number of its most traded currency counterparts. The ‘Kiwi’ dropped to a low of 0.4909 against the Pound, 0.6766 against the Euro and 0.9506 against the Australian Dollar as the Reserve Bank of New Zealand’s (RBNZ) dovish policy statement saw demand for the commodity-driven currency plummet.

The central bank may have opted to leave interest rates on hold, as was expected to be the case by the majority of economists, but it implied that borrowing costs could be cut in the very near future should financial conditions warrant a revision. Although some investors are expecting the Reserve Bank of Australia (RBA) to cut borrowing costs in the next couple of months (a fact which is weighing on the ‘Aussie’) the New Zealand Dollar’s attempt to reach parity with its South Pacific peer was thwarted by this latest development.

RBNZ Governor Graeme Wheeler stated; ‘The bank expects to keep monetary policy stimulatory and is not currently considering any increase in interest rates. It would be appropriate to lower the OCR [official cash rate] if demand weakens and wage and price-setting outcomes settle at levels lower than is consistent with the inflation target.’

The New Zealand Dollar’s declines were a little stymied as New Zealand’s Building Permits report printed positively. Building permits were shown to have increased by 11% on the month in March, month-on-month. This followed a -6.5% decline in April. Before the weekend further New Zealand Dollar movement could be caused by China’s Manufacturing and Non Manufacturing PMIs. Economists have forecast that the Manufacturing measure slid from 50.1 to 50.0 in April, taking it right to the border separating growth from contraction. If this proves to be the case we could see the New Zealand Dollar extend declines. Investors will also be taking an interest in the domestic QV house price report and Australia’s AiG Performance of Manufacturing Index and Producer Price Index. Next week the major economic reports to be aware of for New Zealand are Unemployment Rate and Employment Change. Ecostats from China will also be having an impact.