Member log in

NZ dollar slips to four-day low against Euro after ECB moves to neutral stance

The New Zealand dollar slipped to a four-day low against the euro after the European Central Bank indicated it has moved to a more neutral stance after cutting interest rates last month.

The kiwi dropped as low as 59.77 euro cents early this morning and was trading at 60.12 cents at 8am in Wellington from 60.40 at 5pm yesterday. The local currency edged up to 82.16 US cents from 82.07 cents yesterday.

The 17-nation European currency appreciated after the ECB yesterday kept its key interest rate unchanged at its last policy meeting of the year and president Mario Draghi gave no indication that he would introduce further monetary stimulus to boost the region's economy. The bank surprised financial markets last month by cutting its key rate to 0.25 percent after weaker inflation data.

"Euro strengthened last night as the European Central Bank moved to a more neutral stance after last month's cut," Con Williams, agri economist at ANZ New Zealand, said in a note. "Without any new additional liquidity/policy measures and a relatively neutral tone from Draghi at the press conference the euro rallied."

Today, traders are awaiting a key employment report from the US which is expected to show non-farm payrolls increased 180,000 last month and the unemployment rate fell to 7.2 percent from 7.3 percent, according to a Reuters survey of economists.

Reports yesterday showed the US economy grew faster than initially estimated in the third quarter while initial claims for state unemployment benefits dropped last week. Traders are eyeing stronger US economic data in the expectation the Federal Reserve may pull back on its US$85 billion a month bond buying programme which has weakened the greenback.

"At the margin it adds to the Fed to begin tapering in December at their 17/18 meeting, with tonight's payrolls print likely to be crucial," said the ANZ's Williams.

The New Zealand dollar slipped to 90.62 Australian cents from 90.76 cents yesterday ahead of a report on Australian construction activity at 11:30am New Zealand time.

The kiwi weakened to 83.54 yen from 84 yen yesterday and advanced to 50.32 British pence from 50.01 pence after the Bank of England kept its policy unchanged following a meeting yesterday. The trade-weighted index slipped to 77.14 from 77.29 yesterday.

(BusinessDesk)