The New Zealand dollar tumbled to the lowest level in more than a week after a slump in business confidence and building permits fueled speculation the central bank will cut interest rates.
ANZ Bank New Zealand Ltd. expects the Reserve Bank of New Zealand to reduce the official cash rate twice this year, after previously predicting the central will keep it unchanged at 2.5 percent.
“The New Zealand dollar has become disconnected from global fundamentals, ignoring credit market woes, global growth concerns and falling commodity prices,” Sam Tuck, a senior currency strategist at ANZ Bank New Zealand in Auckland wrote in a report. “But we now expect it to reconnect, given prospects for two OCR cuts, and tightening financial conditions that suggest that the run of outperforming New Zealand data is set to end.”
The kiwi dropped 0.6 percent to 65.92 U.S. cents at 6:45 a.m. in London, after reaching 65.66, the weakest since Feb. 19.
A gauge of business confidence compiled by ANZ Bank New Zealand fell to 7.1 for January, from 23 in December. Home-building approvals fell 8.2 percent from the previous month, their first decline since September.