The New Zealand dollar extended its decline, hitting a new two-year low, as investors started pricing in an outside chance the Reserve Bank may cut interest rates, adding to the negative sentiment for the currency.
The kiwi fell as low as 67.44 US cents and traded at 67.52 cents as at 8am in Wellington from 67.80 cents yesterday, having slumped 6.7 percent so far this quarter. The trade-weighted index fell to 72.38 from 72.61, having declined a more modest 2.2 percent this quarter.
Reserve Bank governor Adrian Orr yesterday kept the official cash rate at 1.75 percent and again kept the door open for a cut as well as a hike, citing weak business confidence and the escalating global trade tensions, while also noting a softer fiscal stimulus. The kiwi was already on the back foot with the US Federal Reserve in a tightening cycle, reducing the allure of local returns, while Chinese moves to devalue the yuan have some traders nervous about the Asian nation's policy response to a trade war and slowing growth.
"The NZD continued to push lower through key support levels post the RBNZ. The emerging market currency rout and positioning remain key to short-term direction," ANZ Bank New Zealand rural economist Con Williams said in a note. "A Chinese policy response, positioning and/or easing of trade tensions could well provide a ‘pop’; otherwise NZD/USD could be headed toward the 0.65 zone rather quickly."
Local data today include the ANZ consumer confidence survey, which is expected to show households are still more optimistic than firms, while May building consents remain in focus with the nation's house-building pipeline set to be a major source of activity for some time to come.
The local currency fell to 91.84 Australian cents from 92.14 cents yesterday and declined to 4.4715 Chinese yuan from 4.4842 yuan. It decreased to 74.61 yen from 74.79 yen yesterday and traded at 51.64 British pence from 51.72 pence. The kiwi fell to 58.37 euro cents from 58.64 cents yesterday.