The New Zealand dollar extended its decline from a four-year high against the yen as traders pondered the pace of monetary easing by the Bank of Japan that has weakened its currency against most trading peers.
The New Zealand dollar dropped to 72.8 yen from 73.10 yen at 5pm in Wellington yesterday. The kiwi slipped to 83.49 US cents from 83.55 cents.
The Bank of Japan will consider monetary easing this month and may double its inflation target to lift growth in the world's third-biggest economy, Reuters reported, citing unnamed sources. The BOJ, under pressure from new Prime Minister Shinzo Abe, will likely adopt an inflation target of 2 per cent at its meeting on January 21-22, the report said. At home, building consents for November are due later this morning, which may show a rebound after a 1.5 per cent decline in October.
"We suspect the NZD/JPY has gotten itself a little overstretched (on the JPY side)," Mike Jones, currency strategist at bank of New Zealand, said in his morning note. "To us, the balance of risks is still skewed in favour of additional NZD/JPY appreciation, but we may see a near-term correction back towards 70.00 before the uptrend resumes."
Helping weaken risk sentiment, stocks on Wall Street declined ahead of earning season, expected to show tepid growth in corporate profits in the fourth quarter. And the US National Federation of Independent Business said its Small Business Optimism Index rose 0.5 to 88 last month. That's the second lowest reading since March 2010.
