Dollar hits five-year low as RB cuts rate to 6.5%
By Paul McBeth
The New Zealand dollar sank to a five-year low and may extend its slide after the Reserve Bank cut the official cash rate by 100 basis points amid the outlook for a worldwide downturn in economic activity.
“Ongoing financial market turmoil and a deteriorating outlook for global growth” were the main reasons for the cut, said Governor Alan Bollard in a statement. “The reduction in domestic spending will be partly offset by the depreciation of the New Zealand dollar.”
In further signs of a global slump, Bank of England Governor Mervyn King yesterday said the UK economy has probably entered a recession. The FTSE 100 Index fell 4.5%, as did Germany’s DAX 30. The Dow Jones Industrial Average slid 6.7% and prices tumbled for oil, gold and copper.
The New Zealand dollar fell as low as 58.29 US cents after the statement, from 59.97 cents yesterday. It recently traded at 59.35 cents. It plunged to as low as 56.9 yen from 59.54 yen and was recently at 58.01 yen. It dropped as low as 87.30 Australian cents from 89.18 cents and was recently at 88.04 cents.
“The long-term trend is down,” said Michael Gordon, Westpac economist, of the kiwi. The currency had to “absorb the effects of the world economy” slowing, which will curb demand for the nation’s exports of dairy products, meat and logs.
The New Zealand economy contracted in the first two quarters of the year and some economists now predict it will extend the contraction to a full 12 months in the first recession since 1998.
ANZ Bank has predicted the OCR will be cut to as low as 4.75% in 2009 to restore an economy hit by a housing slump, waning corporate profits and a rising jobless rate.
Inflation peaked at an annual rate of 5.1% in the third quarter and will probably recede back to within the central bank’s 1% to 3% target range by mid-2009, Bollard said today.
BusinessWire.co.nz
Related News
MARKET CLOSE: NZ shares slip; Warehouse down after result, PGC gains Strategic Finance in receivership Sumitomo moves to take 20% of Nufarm, gaining Australasian farm chemicals NZ food innovation initiative aims to fast-track new product commercialisation Weekly Diary for Monday 15th March 2010 Accommodation providers experience best month ever in January NZ retail sales rose in January, led by vehicles; core sales weaker than forecast Pyne Gould's MARAC gains admission to government's extended Retail Deposit Guarantee Scheme: Steam still coming out of house sales: REINZ Perpetual Portfolio Management adds to its team
|
Previous News
Sharemarket News By Email
Stock Quote
At a Glance
| NZX 50 Index |
3225.14 |
 |
1.70 |
| S&P/ASX 200 |
4818.10 |
 |
3.90 |
| Dow Jones Industrials |
10611.80 |
 |
44.50 |
Comment & Analysis
|
“
Good news was released this week, we, the taxpayers, creamed almost $300 million out of financial institutions during the recently-forgotten global financial crisis (GFC).
In a release announcing the end of the government guarantee for wholesale funds, Finance Minister Bill English let slip that the GFC was actually a huge revenue-generating opportunity [...]
”
David Chaplin More »
|
|
|