Sharechat Logo

NZ dollar drops after Bollard says currency strength will keep rates low

Thursday 8th March 2012

Text too small?

The New Zealand dollar fell after Reserve Bank Governor Alan Bollard said the strength of the currency will keep interest rates lower for longer and weigh on economic growth.

The New Zealand dollar fell to 81.52 US cents at 9.25am from 81.92 cents immediately before Bollard released the monetary policy statement at 9am. The trade-weighted index fell to 72.41 from 72.77.

Bollard said a strong kiwi dollar constrains imported inflation but it also is “detrimental to the tradable sector, undermines GDP growth and inhibits rebalancing in the New Zealand economy.” He cut the top end for the track of the 90-day bank bill, which he sees settling at 3.6 percent by the tail-end of 2014. It had previously projected the rate would rise to 4 percent by September next year.

"It is a much more dovish tone than expected,” said Cameron Bagrie, chief economist at ANZ National Bank. “The New Zealand dollar will remain under pressure within our time zone - domestic considerations tend to have a lifeline of 12 hours.”

The kiwi dollar erased much of the half a US cent gain overnight that was driven by US figures showing the world’s largest economy added 216,000 jobs in the private sector in February.

The bank lifted its forecast for the kiwi dollar, with the TWI expected to hold above 70 until the December quarter next year. The Reserve Bank had previously expected the TWI to fall to 65 from 67 over that period.

(BusinessDesk)

BusinessDesk.co.nz

Bond Offer: Infratil Ltd, 7.2 year & 10.2 year unsecured unsubordinated bond


  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ dollar gains on G20 preference for growth
NZ dollar dips as Wellington CBD checked for quake damage
NZ dollar gains, bolstered by RBA minutes, strong dairy prices
NZ dollar falls after central bank says it may scale up currency intervention
NZ dollar gains before CPI, helped by dairy gains, rally on Wall Street
NZ dollar trades little changed as US budget talks bear down on deadline
NZ dollar falls with equities on view US to sail over fiscal cliff
NZ dollar weakens as fiscal cliff looms, long bets unwind
NZ dollar sinks to three-week low as equities fall, fiscal talks in focus
NZ dollar slips as fiscal cliff talks grind slower in Washington

IRG See IRG research reports