Thursday 24th July 2008
|Text too small?|
The Kiwi fell to 74.44 US cents after the central bank's announcement, from 75 cents. Governor Alan Bollard cut the official cash rate to 8% from 8.25%, saying even though inflation may peak at 5% in the September quarter, it will probably return to the bank's target range as the economy weakens.
"An easing campaign by the RBNZ will be an important catalyst for NZD depreciation," said Shamubeel Eaqub, director of Australia & New Zealand investment research at Goldman Sachs JBWere (NZ) "The NZD needs to depreciate significantly."
The New Zealand dollar traded at more than 80 US cents this year from less than 60 cents in January 2004, squeezing overseas returns for companies ranging from appliance maker Fisher & Paykel Appliances Holdings to dairy giant Fonterra. Shares of Fisher & Paykel, which has moved factories overseas to boost its margins, surged 4.5% today.
Economists say today's interest rate cut heralds the start of a prolonged series of reductions by the central bank. Stephen Toplis, head of research at Bank of New Zealand, said the official cash rate will have fallen to 7.25% by year-end and may be cut to as low as 5.5% by the end of 2009.
"Tighter monetary policy was prescribed to take the heat out of the economy and from the housing market in particular," Toplis said in a note.
"It has succeeded in doing so and the process has been exacerbated by a series of nasty shocks including the commodity price spike, credit crunch and drought," he said.
Bollard said he "would expect to lower the OCR further" provided the inflation outlook continues to improve and the Kiwi doesn't decline excessively.
No comments yet
Contact Energy Limited (NZX: CEN) Considers Green Capital Bond Offer
Tourism Holdings Limited (NZX: THL) Sells Mighway and SHAREaCAMPER to Camplify
26th October 2021 Morning Report
Harmoney Corp Limited (NZX: HMY) Prices $105m Inaugural ABS Transaction
New Zealand Rural Land Company Limited (NZX: NZL) Agreement to acquire large scale dairy asset portfolio
EROAD Limited (NZX: ERD) launches Clarity Solo Dashcam
22nd October 2021 Morning Report
Pictor ready to roll out game-changing COVID antibody test in New Zealand
Scott Technology Limited (NZX: SCT) Announces FY21 Results
21st October 2021 Morning Report