NZ dollar falls vs strengthening euro after officials say ECB could wind down stimulus

The kiwi dollar fell to 59.75 euro cents as at 8am in Wellington. Photo: John Sefton

The New Zealand dollar fell against the euro after officials in Europe said the European Central Bank could wind down its stimulus measures by the end of the year in a first step toward returning to a more normal monetary policy as inflation picks up.

The kiwi dollar fell to 59.75 euro cents as at 8am in Wellington from traded at 60.08 cents late yesterday. The kiwi traded at 70.30 US cents from 70.39 cents yesterday and the trade-weighted index fell to 73.45 from 73.58.

Reuters reported that ECB chief economist Peter Praet said the bank will debate whether to gradually unwind its bond purchase programme at a meeting next week, while a German bank official said an end to bond buying this year was plausible. Comments from ECB and other European officials helped drive up bond yields in Italy, Germany and France and helped boost the euro against the greenback.

"This will be the first formal meeting (we know of) on winding down the program, and it may result in an announcement of the end date for bond purchases (or an indication of when such an announcement might occur)," Liz Kendall, senior economist at ANZ Bank New Zealand, said in a note. "It is possible that nothing will materialise out of next week’s discussions; the ECB may wish to retain a cautious approach in light of downside risks, especially relating to recent political events."

The New Zealand dollar traded at 91.73 Australian cents from 91.90 cents yesterday when figures showed Australian gross domestic product grew a faster-than-expected 1 percent in the first quarter for a 3.1 percent annual rate. Across the Tasman today, traders will be watching for Australia's trade data for April. No New Zealand data is scheduled for today.

The kiwi fell to 52.44 British pence from 52.52 pence yesterday. It traded at 77.48 yen from 77.39 yen and fell to 4.4893 yuan from 4.5014 yuan.