Kiwi Retreats After RBNZ Signals Need for Further Policy EasingBy
New Zealand’s dollar fell for the first time in four days after the central bank signaled further policy easing will be needed and the Federal Reserve refrained from tightening.
The kiwi was down 0.2 percent at 73.36 U.S cents as of 8:52 a.m. in London after rising as much as 0.3 percent against the greenback earlier in the session. The currency ended a 1.2 percent gain over the past three days.
While the Reserve Bank of New Zealand on Thursday opted to keep its benchmark interest rate unchanged at 2 percent, policy makers said they expect to cut again to achieve their inflation target. Investors increased bets on a November rate cut, with the probability of a move by then rising by 19 percentage points to 70 percent in the swaps market.
“The RBNZ Statement, although little changed from August, was slightly more dovish than the market anticipated,” said Jason Wong, a currency strategist in Wellington at Bank of New Zealand Ltd. “This was probably a tactical move by the central bank to avoid any undesired appreciation in the kiwi.”
A divided Fed on Wednesday left its main interest rate unchanged to await more evidence of progress toward its goals, while projecting that an increase is still likely by year-end.
New Zealand’s 10-year bonds jumped by the most in three months, pushing their yield down by 13 basis points to 2.49 percent. Comparable yields in Australia and South Korea dropped by at least eight basis points to 2.04 percent and 1.52 percent, respectively.