A growing belief that New Zealand's interest rates are dropping along with its economy has taken its toll on the New Zealand dollar in Friday afternoon trade. The New Zealand dollar hit a fresh 10 and a half month low of just under 70 US cents in late trade before blipping back up to 70.1 US cents. The New Zealand dollar has now fallen almost 10% since the Reserve Bank surprised many on July 24 by cutting the Official Cash Rate to 8% from 8.25% and indicating further cuts were possible later this year, "provided the inflation outlook continues to improve and there is no excessive exchange rate depreciation." How much is excessive? You have to wonder too how much of a factor in the Reserve Bank's thinking its own NZ$3.7 billion short position in the New Zealand dollar, which tends to work against its stated aim of making sure the currency doesn't fall too fast and boost inflation. See a NBR article for more detail on this.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.