The New Zealand dollar weakened against the other major currencies in the Asian session on Thursday after the Reserve Bank of New Zealand lowered its Official Cash Rate for the first time since 2011.
The RBNZ lowered its Official Cash Rate by 25 basis points, to 3.25 percent from 3.50 percent. This defied expectations for a no change for a seventh consecutive month from the RBNZ, which had hiked the OCR by 25 basis points in each of previous four meetings prior to September.
Before that, there were 23 straight meetings with no change. The OCR had been at a record low 2.50 percent since March 10, 2011 as the country dealt with the global economic slowdown.
“Inflation has been low due to falling import prices and the strong growth in the economy’s supply potential. Wage inflation and inflation expectations have been subdued,” RBNZ Governor Graeme Wheeler said in a statement accompanying the decision.
The bank justified the rate cut, citing falling commodity prices and a decline in demand. The board also pointed to the easing NZ dollar, adding that further depreciation is to be expected.
Wednesday, the NZ dollar showed mixed trading against its major rivals. While the NZ dollar rose against the U.S. dollar, the euro and the Australian dollar, it fell against the yen.
In the Asian trading today, the NZ dollar fell to nearly a 5-year low of 0.7009 against the U.S. dollar, from yesterday’s closing value of 0.7191. If the kiwi extends its downtrend, it is likely to find support around the 0.69 area.
The kiwi dropped to 1.1068 against the Australian dollar for the first time since 14 November 2014. The pair was quoted at 1.0745 at yesterday’s close. The kiwi may test support around the 1.11 area.
Against the yen, the kiwi slipped to more than a 4-month low of 86.02 from yesterday’s closing value of 88.30. On the downside, 83.50 is seen as the next support level for the kiwi.
The kiwi slid to nearly a 6-month low of 1.6106 against the euro, from yesterday’s closing value of 1.5709. The kiwi is likely to find support around the 1.63 area.
Looking ahead, Canada house price index for April, U.S. jobless claims for the week ended June 6, U.S. import price index for May, business inventories for April and retail sales data for May are slated for release in the New York session.
At 10:30 am ET, Bank of Canada Governor Stephen Poloz will hold a news conference following the release of the financial system review in Ottawa, Canada.
At 12:00 pm ET, German Bundesbank Board member Andreas Dombret is expected to speak on “Designing a Stable Monetary Union-Progress and Open Issues” in Prague.
The material has been provided by InstaForex Company – www.instaforex.com