Dollar falls after OCR decision

The New Zealand dollar fell sharply today following the Reserve Bank of New Zealand's (RBNZ's) calming statements over the official cash rate and traders' decreased risk appetite.

"There's a sour taste in the market, really. Risk aversion is sky-rocketing, seeing investors ditch growth currencies like the kiwi in favour of the relative safety of the US dollar and the yen," BNZ Capital senior strategist Danica Hampton said.

The NZ dollar plummeted to US71.74c by 5pm today, its lowest in three weeks.

"If you roll back to 48 hours ago, we were above 75c. When we walked in this morning, we were just under 73c, so we have seen quite a fall."

Reserve Bank Governor Alan Bollard's announcement that the bank saw no reason to withdraw monetary pricing stimulus and to keep the OCR at 2.5 per cent until the second half of 2010 had also moved the market, she said.

"While they left interest rates unchanged, their comments were much less hawkish than many markets were expecting."

The New Zealand dollar tumbled after the release of Dr Bollard's statement, from around US72.80c at 9am to about US72c within 45 minutes. It closed yesterday at US73.82c.

General risk aversion would see the New Zealand currency relegated to selling on rallies, with the currency not trading for more than US73.5c, Ms Hampton said.

"We have seen it move a long way in quite a short period of time, so there will be profit taking at some stage and we will see bounces."

The NZ dollar also fell against all major currencies. Against the Australian dollar it fell to A79.92c, from A81.20c at 5pm yesterday, to 0.4870 euro from 0.4982 yesterday, 64.77 yen from 67.35 and against the pound to 43.79p, down from 45.12p.

The trade weighted index fell to 64.75 from 66.49 yesterday.

Overseas, the greenback held firm, near its highest in more than two weeks against a basket of currencies, while the yen strengthened.

- NZPA