Friday 26th July 2019
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The New Zealand dollar is sharply weaker as markets focus on a likely rate cut in early August, in particular after the head of the Australian central bank said he's ready to cut rates if necessary.
The kiwi was trading at 66.57 US cents versus 66.95 US cents at 5pm in Wellington and the trade-weighted index eased to 73.08 points from 73.39.
Kiwibank trader Mike Shirley said the fall in the kiwi was kicked off when RBA governor Philip Lowe told the Anika Foundation lunch that "if demand growth is not sufficient, the board is prepared to provide additional support by easing monetary policy further." While economists are expecting the RBA to keep rates on hold at 1.0 percent at the August 6 meeting, they are expecting rates to be 0.5 percent by early next year.
"The kiwi is under pressure...the thinking goes that, if the RBA is thinking about that, then New Zealand will probably be thinking about that too," said Shirley. The New Zealand central bank has a cash rate decision on Aug. 7 and is expected to cut rates from the current 1.50 percent by at least 25 basis points.
The kiwi was also weighed by a stronger greenback when a lift in US June durable orders indicated that business investment in the US is picking up, said ANZ Bank FX/rates strategist Sandeep Parekh. New orders for manufactured durable goods in June increased US$4.9 billion, or 2.0 percent on the month, to $246.0 billion, the U.S. Census Bureau said. Economists polled by Dow Jones Newswires had expected a 0.5 percent increase.
Looking ahead, investors will now be waiting for the initial estimate on second quarter US gross domestic product data due Friday for a further steer on the health of the that economy. Economists are expecting growth of around 2.0 percent, down from 3.1 percent in the first quarter.
The New Zealand dollar was trading at 95.80 Australian cents from 96.05, at 53.48 British pence from 53.68, at 59.74 euro cents from 60.12, at 72.38 yen from 72.40 and at 4.5743 Chinese yuan from 4.6038.
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