Kiwi Falls to 5-Year Low as Central Bank Unexpectedly Cuts Rates

The New Zealand dollar slumped to its lowest in almost five years after the nation’s central bank unexpectedly cut interest rates.

The kiwi declined versus all of its major peers as policy makers lowered borrowing costs for the first time since 2011 and said “further easing may be appropriate.” Low rates are needed to address low inflationary pressures and weaker demand, Reserve Bank of New Zealand Governor Graeme Wheeler said Thursday in Wellington, after cutting rates 0.25 percentage point to 3.25 percent.

“Quite clearly, the economics justified a cut,” Sam Tuck, an Auckland-based senior currency strategist at ANZ Bank New Zealand Ltd., said by phone. “This is a prudent, insurance cut for the market. Hopefully the situation won’t decline further.”

The New Zealand dollar lost 2 percent to 70.61 as of 5:34 p.m. in New York, after touching 70.19 U.S. cents, its lowest since Sept. 1, 2010.

Six of 16 economists surveyed by Bloomberg before the meeting forecast a cut, with 10 predicting no change.

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