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NZ dollar falls after US Federal Reserve cuts rates

Thursday 1st August 2019

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The New Zealand dollar fell after the US Federal Reserve cut rates by 25 basis points, as expected, for the first time in a decade, upping the ante on the Reserve Bank to cut rates next week. 

The Kiwi was trading at 65.62 US cents at 7:45 versus  65.97 US cents at 5pm in Wellington.  The trade-weighted index fell to 72.43 points from 72.56.

"In light of the implications of global developments for the economic outlook, as well as muted inflation pressures, the committee decided to lower the target range for the federal funds rate to 2 to 2.25 percent.," the Fed said in a statement. It also said it will "continue to monitor" and will "act as appropriate to sustain the expansion."

The decision was not unanimous, with two members of the committee arguing to leave rates unchanged. Also, the greenback got a lift when the US Federal Reserve chair Jerome Powell signaled the rate cut isn't necessarily the start of easing cycle during the press conference following the announcement. 

"That comment from Powell really hit the kiwi hard," said Kiwibank trader Mike Shirley.   

The kiwi is also struggling as the US rate cut will increase pressure on the Reserve Bank of New Zealand to cut rates by at least 25 basis points to a record low 1.25 percent at next week's review. 

The New Zealand dollar was at 95.92 Australian cents from 95.61, at 53.98 British pence from 54.43, at 59.27 euro cents from 59.11 at 71.46 yen from 71.58 and at 4.5175 Chinese yuan from 4.5378

(BusinessDesk)

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