Kiwi drops below 73USc ahead of RBNZ as global volatility subsides
(BusinessDesk) - The New Zealand dollar dropped below 73 US cents ahead of the Reserve Bank's policy review which will likely keep interest rates on hold as other central banks are poised to start hiking.
The kiwi fell to 72.52 US cents as at 8am in Wellington from 73.07 cents late yesterday. The trade-weighted index declined to 74.53 from 74.79 yesterday.
RBNZ acting governor Grant Spencer is expected to keep the official cash rate at a record low 1.75 percent and affirm projections for the benchmark rate to stay unchanged until at least next year as the central bank contends with persistently low inflation. Fourth-quarter consumers price index figures were surprisingly soft, although global inflation may start rearing its head after strong wage growth in the US stoked expectations the Federal Reserve will raise rates more aggressively, triggering a bout of market volatility at the start of the week which has cooled in the past two days.
"It doesn't feel like a backdrop where the RBNZ will feel comfortable going out on a limb and taking a strong view - or at least a view that significantly departs from its previous thinking," ANZ Bank New Zealand senior economist Phil Borkin said in a note. "Despite appearing to be on the back foot at the time of writing, it is likely to take quite a dovish RBNZ statement (which is not really our expectation) to knock it down in a sustained fashion."
The kiwi was little changed at 92.69 Australian cents from 92.92.68 cents yesterday ahead of Reserve Bank of Australia governor Philip Lowe's speech to a business audience tonight. The RBA will release its monetary policy statement tomorrow, having kept the target cash rate at 1.5 percent on Tuesday.
The local currency declined to 4.5433 Chinese yuan from 4.5698 yuan yesterday and fell to 79.25 yen from 79.89 yen. It dropped to 59.13 euro cents from 59.98 cents yesterday and traded at 52.29 British pence from 52.34 pence.