NZ dollar recovers from drop
It was the second time in less than a week that comments by Prime Minister John Key were followed by a rapid decline in the kiwi.
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The New Zealand dollar recovered after diving when Prime Minister John Key said a drop to the official cash rate (OCR) would be useful.
The NZ dollar fell fast from around 73.80USc against the greenback, where it was at the end of trading on Saturday, to near 73.40USc. That was close to an 11-week low reached early on Saturday.
It recovered to be 73.75USc at 5pm today from 73.79USc at the same time on Friday.
It was the second time in less than a week that comments from Mr Key were followed by a rapid decline in the NZ dollar.
Last Wednesday, Mr Key said the market had priced in a cut to the OCR and it "would probably be my expectation, that the Reserve Bank would cut."
Many economists are expecting Reserve Bank Governor Alan Bollard to cut the OCR from 3% to 2.5% on Thursday in response to the devastating earthquake in Christchurch on February 22.
BNZ's economists said today that they did not don't envy the Reserve Bank's task.
"It could reasonably decide on any number of OCR and rhetoric combinations, for any number of reasons," BNZ said. "With this in mind, it would be a brave person to punt on the outcome on the day, especially at a time when emotions are running high from the earthquake and plenty of pressure from financial markets, and arguably the political."
Meanwhile, Westpac said today that negative gross domestic product growth in the March quarter was virtually assured.
"And there is little prospect of a better performance in the June quarter. Our annual GDP growth forecast for the year to June 2011 is now 0.5%. We expect job losses associated with the earthquake will cause the unemployment rate to rise to 7% from 6.8% currently."
The NZ dollar rose to 72.80Ac from 72.50Ac at 8am -- its lowest level in 18-1/2 years -- having been around 72.79Ac at 5pm on Friday.
The US dollar was on the backfoot today after posting losses during the weekend when a solid US February jobs report did little to alter expectations for Federal Reserve monetary policy.
The NZ dollar was at €0.5276 at 5pm from €0.5250 at 8am and at €0.5284 at 5pm on Friday. The kiwi was at ¥60.59 from ¥60.47 yen at 8am and from ¥60.76 on Friday.
The trade weighted index was at 65.01 at 5pm from 65.07 at the same time on Friday.
NZPA
Mon, 07 Mar 2011
Mon, 07 Mar 2011
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NZ dollar recovers from drop
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