The New Zealand dollar plunged more than a US cent today after the Consumer Price Index (CPI) for the December quarter was lower than expected and after China was reported to be constraining bank lending.The NZ dollar fell from around 74USc to 73.50USc af
The New Zealand dollar plunged more than a US cent today after the Consumer Price Index (CPI) for the December quarter was lower than expected and after China was reported to be constraining bank lending.
The NZ dollar fell from around 74USc to 73.50USc after the CPI was reported to have fallen 0.2% in the December quarter to put the annual rate at 2%.
"The market was positioned for a flat result, or maybe even a positive number, and it came out negative 0.2%,'' said Mike Jones, currency strategist at BNZ Capital.
The rate was seen as being in line with the Reserve Bank of New Zealand's view that interest rates can stay on hold to the middle of the year. Some commentators were looking for a rise in interest rates before then.
The downward momentum in the NZ dollar was reinforced by reports that Chinese banking authorities have instructed some major banks to halt their lending during the rest of January after a burst of credit in the first couple of weeks, official media and banking sources said.
The official China Securities Journal cited unnamed banking sources as saying that some banks had been told to stop all lending, including short-term bills, for the rest of the month, Reuters reported.
An effective tightening in policy in China to reign in the economy is negative for commodities and commodity sensitive currencies.
The Shanghai stock exchange fell 0.7% after the Chinese news.
The NZ dollar was 72.86USc shortly after 3pm from 73.91USc at 8am, which was similar to its 5pm level yesterday.
Mr Jones said speculators had jumped on board the downward trend in the NZ dollar and several support levels had been broken. Support was now seen around 72.80USc.
The euro also fell to its lowest level in four months against sterling in Asian trading on continued worries about Greece's finances.
The NZ dollar surged to a 22-month high of €0.5178 overnight but was back at €0.5133 by mid-afternoon from €0.5128 at 5pm yesterday.
The NZ dollar fell to ¥66.55 from ¥66.83 at 5pm yesterday while against the Aussie the kiwi fell to 79.56Ac from 79.85Ac.
The trade weighted index fell to 66.35 from 66.95 at 8am from 66.68 at 5pm yesterday.
