Kiwi falls back below 70USc after weak growth spurs rate cut calls
Kiwi fell to 68.90USc at 5pm from 69.94USc at 8am and 69.66USc yesterday.
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The New Zealand dollar fell back below 70USc in local trading after weaker-than-expected economic growth in the first three months of the year spurred speculation that the Reserve Bank will cut interest rates more aggressively.
The kiwi fell to 68.90USc at 5pm from 69.94USc at 8am and 69.66USc yesterday. It spiked above 70USc after the US Federal Reserve lowered its estimate for global growth, prompting some investors to question whether the world's biggest central bank will raise interest rates this year.
New Zealand's gross domestic product grew 0.2% in the three months ended March 31, a third of the Reserve Bank's forecast. The slower pace of growth stoked expectations the central bank will cut interest rates after governor Graeme Wheeler lowered the official cash rate last week and signalled one more cut to come this year. Traders have priced in 40 basis points of cuts over the coming 12 months, according to the Overnight Index Swap curve, implying a second cut has almost been fully priced in by the market.
"The market was always going to get carried away on the downside on rate cuts," said Tim Kelleher, head of institutional foreign exchange sales at ASB Institutional in Auckland. "Sixty-seven to 69USc is a good buy. I'd still sell the kiwi on rallies."
Kelleher said ASB expects the Reserve Bank will cut the 3.25% OCR in July but won't lower it further.
New Zealand's two-year swap rate fell to 3.07% at 5pm in Wellington from 3.15% yesterday, and the 10-year swap rate declined to 3.86% from 3.99%.
The kiwi dollar dropped to 60.66 euro cents from 61.87 cents yesterday as negotiations between Greece and its European creditors continued to founder. It fell to 43.53 British pence from 44.53p yesterday, and sank to ¥84.86 from ¥86.
The local currency fell to 84.86Ac from 90.17Ac yesterday, and dropped to 4.2804 Chinese yuan from 4.3247 yuan. The trade-weighted index declined to 71.74 from 72.73 yesterday.
(BusinessDesk)
Paul McBeth
Thu, 18 Jun 2015
Thu, 18 Jun 2015
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Kiwi falls back below 70USc after weak growth spurs rate cut calls
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