Fundamental Comment

NZ dollar plunges to 2-1/2 year low after RBNZ dovish stance


The New Zealand dollar traded near its lowest level in nearly 2-1/2 years on Thursday after the Reserve Bank of New Zealand’s dovish stance on interest rates.

The NZDUSD pair is meanwhile 1.16 percent down to 0.6656 after hitting a low of 0.6651, the lowest level since mid-March 2016.

The RBNZ said interest rates would remain low for two years as the outlook for the economy weakened.

“We expect to keep the OCR at this level through 2019 and into 2020, longer than we projected in our May statement,” Reserve Bank Governor Adrian Orr said.

The central bank has pushed its forecasts for the first rate hike since the end of 2016 to the third quarter of 2020, where it had predicted the rate increase to be in the same period in 2019 in their May estimates.

The RBNZ slashed its growth forecasts to 2.3 percent in the year through June 30, then strengthens to 2.9 percent in the first quarter of 2019, compared to a 3.3 percent expansion anticipated in three months ago.

Softer growth, higher real-estate costs and the risks stemming from a global trade war have all prompted the RBNZ to hold its monetary policy.

The dollar index, which tracks the green currencies movements versus a basket of major currencies, rebounded to 95.11 after falling to a low of 94.86.

Later in the day, the U.S. will release its producer prices inflation gauge for the July and the weekly unemployment claims.

Share Article