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NZ dollar falls after RBA rate cut

NZ NewswireNZ Newswire 3/05/2016 Tina Morrison
NZ dollar © Getty NZ dollar

The New Zealand dollar fell as investors sold Australasian currencies after the Reserve Bank of Australia cut its benchmark interest rate on concern about weak inflation.

The kiwi dropped to 69.12 US cents at 8am in Wellington, from 70.46 cents immediately before the RBA's decision at 4.30pm on Tuesday. The Aussie slid to 74.86 US cents from 77.09 cents ahead of the RBA move.

Investors shunned the Aussie and kiwi dollars after the RBA reduced its key rate by 25 basis points to 1.75 per cent following weaker-than-expected first quarter inflation data last week.

Most economists had expected the RBA to remain on hold, while traders were evenly split on the potential for a cut.

Sentiment against the kiwi was further hurt by a softer GlobalDairyTrade auction overnight, with the GDT price index falling 1.4 per cent, compared with expectations for a gain.

"The big drop was yesterday afternoon's surprise RBA rate cut. We got pulled down by it, " said Bancorp Treasury Services' Peter Cavanaugh.

"Like it or not, the world lumps New Zealand with Australia in a lot of cases. We are just going along for the ride.

"The uninspiring GDT auction outcome hasn't really helped," he said.

New Zealand labour market figures published on Wednesday are expected to show the unemployment rate increased to 5.5 per cent in the March quarter, from 5.3 per cent in the December quarter. QV's monthly housing data and the ANZ monthly commodity price index are also scheduled for release.

However, Mr Cavanaugh said the main focus for the remainder of the week is US jobs data due out Friday for more clues to the timing of rate hikes by the Federal Reserve.

The New Zealand dollar was little changed at 92.27 Australian cents from 92.26 cents, after jumping to a two-month high of 92.94 cents following the RBA announcement.

The New Zealand dollar fell to 60.07 euro cents from 60.49 cents, slipped to 73.57 yen from 73.95 yen, and declined to 4.4859 yuan from 4.5172 yuan. It was little changed at 47.55 British pence from 47.54 pence. The trade-weighted index dropped to 73.02 from 73.40.

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