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26 Feb 2018 6:38
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  •   Home > News > Business

    NZ dollar falls after RBNZ stands pat

    The New Zealand dollar fell to a four-week low against the greenback on Thursday after the central bank kept rates on hold as expected.

    8 February 2018

    The New Zealand dollar fell to a four-week low against the greenback on Thursday after the central bank kept rates on hold as expected and continued to signal no increases until at least the latter half of next year.

    The kiwi fell to US71.90c, the lowest since January 11 as at 5pm from 72.52c as at 8am in Wellington from 73.07c late Wednesday.

    Acting Reserve Bank governor Grant Spencer kept the official cash rate unchanged at 1.75 per cent and forecast it will rise to 1.9 per cent in June 2019, unchanged from its prior projection in November.

    A full rate increase is still signalled by March 2020 when the benchmark rate is forecast to be 2 per cent.

    "That's half a per cent (increase) in the next three years, which sort of threw a damp cloth on anyone who was bullish interest rates," said Martin Rudings, senior dealer foreign exchange at OMF in Wellington.

    Also, the RBNZ now doesn't project headline inflation to get back to 2 per cent until mid-2020, around two years later than it forecast in November.

    The central bank is mandated with keep inflation between 1 per cent and 3 per cent, with a focus on the midpoint.

    "If pushed, we'd say that on balance the changes made to the Statement are a touch more dovish," said ANZ Bank Chief Economist Sharon Zollner.

    Mr Rudings said the kiwi is vulnerable to more downside and could head toward US70.50c "but that would have to be accompanied by some US dollar strength overnight".

    The kiwi was at A91.99c from 92.68c Wednesday. The local currency declined to 4.5308 Chinese yuan from 4.5698 yuan and fell to 78.62 yen from 79.89 yen. It dropped to 58.57 euro cents from 59.98c and traded at 51.77 British pence from 52.34 pence.


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