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NZ dollar falls to 4-week low

NZ NewswireNZ Newswire 26/09/2016 Jonathan Underhill

© Bloomberg The New Zealand dollar fell to a four-week low on growing expectations the Reserve Bank will cut the official cash rate in November and after government figures showed the biggest monthly trade deficit in two years.

The kiwi was trading at 72.39 US cents as at 5pm in Wellington, having touched 72.22 cents in late New York trading on Friday, the lowest since Aug. 31 and down from 72.74 cents in Wellington at the end of last week.

The trade-weighted index declined to 76.93 from 77.20 on Friday.

New Zealand recorded a trade deficit of $1.27 billion in August as dairy and meat led an 8.7 per cent drop in exports. Still, imports of vehicles and parts climbed 13 per cent, in a sign demand is still relatively robust in the domestic economy.

Last Thursday, RBNZ governor Wheeler kept the OCR at 2 per cent, saying more easing was on the cards to get inflation back within the target band of 1-to-3 per cent. T

raders are pricing in a 75 per cent chance of a quarter-point cut in the OCR to 1.75 per cent in November, up from 56 per cent before Thursday's OCR review.

"The kiwi has continued on from its fall last week. The next rate cut is going to be in November, it would be a huge shock if it doesn't happen," said Tim Kelleher, head of institutional foreign exchange sales at ASB Bank.

The kiwi declined to 4.8263 Chinese yuan from 4.8317 yuan on Friday in New York and slipped to 64.44 euro cents from 64.50 cents. It dipped to 55.75 British pence from 55.84 pence and fell to 73.01 yen from 73.18 yen. The kiwi was little changed at 94.94 Australian cents from 94.96 cents.

New Zealand's two-year swap rate fell 3 basis points to 1.97 per cent, and 10-year swaps dropped 4 basis points to 2.46 per cent.

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