Kiwi extends slide on progress with US tax cuts
The New Zealand dollar fell to a five-month low against the greenback on progress for US President Donald Trump's plan to slash taxes and gained against the euro after the European Central Bank said it would cut bond purchases as expected but otherwise kept its dovish tone.
The kiwi fell to 68.36 US cents as at 8:30am in Wellington from 68.88 cents late yesterday and rose to 58.69 euro cents from 58.24 cents. The trade-weighted index sank to 72.66, a new 18-month low, from 72.88 yesterday.
Despite divisions within the Republican ranks, the US House of Representatives voted 216-212 to pass a budget blueprint for the 2018 fiscal year, paving the way for Trump's tax cuts, with legislation expected next week. The US dollar index has gained to a three-month high on optimism about the tax cuts and speculation Trump will install a more hawkish chair to the Federal Reserve.
Meanwhile, the ECB as expected said it would cut asset purchases to 30 billion euros from 60 billion euros starting in January but kept its interest rates unchanged and ECB President Mario Draghi said "an ample degree of monetary stimulus remains necessary".
For the kiwi dollar, "the rout continues. While the pace of the move lower now argues for a period of consolidation, and even a bounce, the technical picture is threatening to look quite bearish," said Sharon Zollner, senior economist at ANZ Bank New Zealand, in a note. "But rather than domestic developments, we suspect the power is now with the USD. Progress on US tax reform appears to have been made, but there are still plenty of hurdles to clear."
Zollner said the kiwi would find support if it fell as low as 68.20 US cents and resistance if it rose to 69.80 cents.
In the US, the Politico website reported that Trump has narrowed his search for the new Fed chair to replace Janet Yellen to Fed Governor Jerome Powell and Stanford University economist John Taylor, both regarded as being likely to raise interest rates at a faster pace than Yellen.
The kiwi dollar has fallen in the wake of the Sept. 23 election as traders await details of the new coalition government's policy plans.
It fell to 89.23 Australian cents from 89.33 cents and dropped to 4.5405 yuan from 4.5671 yuan. It traded at 51.96 British pence from 51.91 pence and declined to 77.90 yen from 78.19 yen.