The New Zealand dollar has consolidated after falling below US65 cents for the first time in six years as a slump in dairy prices and benign inflation stoked expectations of increased interest rate cuts.
The kiwi fell as low as US64.96c late on Thursday, and was trading at US65.09 cents at 0800 on Friday in Wellington.
The tradeweighted index slipped to 69.14 from 69.26.
The local currency weakened after prices for dairy products, the nation’s largest commodity export, dropped more than expected at Thursday’s GlobalDairyTrade auction amid global oversupply and weak demand.
Data showing annual inflation of just 0.3 per cent in the June quarter stoked speculation the central bank could cut the official cash rate more aggressively than previously signalled, with some economists saying the rate could be cut as much as 50 basis points at next Thursday’s review.
“The debate for next week’s OCR meeting is between -25bps and the slight possibility of -50bps, and as ANZ expects only 25bps, risks of further downside surprises for NZD are diminishing,” ANZ senior rates strategist, David Croy, and senior FX strategist, Sam Tuck, said in a note.
“Today should be about consolidation.”
On Friday, inflation data is scheduled for release in the US and Canada, while the US also has a consumer confidence survey due.
In the morning, the NZ dollar fell to 87.91 Australian cents from A88.53c, was little changed at 41.69 British pence from 41.71p, advanced to 59.84 euro cents from 59.62c and was little changed at 80.76 yen from 80.69 yen.
BusinessDesk
