NZ dollar slumps against euro

The New Zealand dollar slumped against the euro after the European Central Bank failed to ease monetary policy as much as expected following its meeting yesterday.

The kiwi dropped to 60.87 euro cents at 8am in Wellington, from 62.72 cents at 5pm yesterday. The local currency advanced to 66.55USc from 66.46USc yesterday.

The ECB cut its interest rate on deposits by 10 basis points to -0.3%, broadened the range of assets accepted in its asset purchase programme and committed to rolling over the stock of debt it had purchased. The further stimulus designed to boost the eurozone economy was less than some traders had expected, prompting them to pull back on bets for declines in the euro, and repurchase the common currency.

"The ECB disappointed a market that was highly positioned overnight, sending this cross plummeting," ANZ Bank New Zealand chief economist Cameron Bagrie and senior FX strategist Sam Tuck said in a note. "However, it still lowered the deposit rate (to -0.3 percent) and announced it would reinvest principal as it rolled off, stressing it can do more. This should provide a floor overall in $NZ/€."

ANZ expects the kiwi to trade between 60.20 euro cents and 61.50 cents today.

In New Zealand today, the ANZ Commodity Price Index is to be published at 1pm, while in Australia October retail sales data is to be released.

Tonight, the focus is on the release of the latest monthly non-farm payrolls report in the US, which will be closely watched by the Federal Reserve as it mulls whether to hike interest rates at its meeting this month. Federal Reserve chairwoman Janet Yellen yesterday stoked expectations the bank will hike following its December 15-16 meeting, citing an improving labour market and the outlook for inflation.

The New Zealand dollar fell to 44.02 British pence from 44.51 pence yesterday, slipped to 81.61 yen from 81.96 yen, declined to 90.67Ac from 90.98Ac and edged up to 4.2573 yuan from 4.2512 yuan. The trade-weighted index fell to 71.96 from 72.29 yesterday.

(BusinessDesk)