Kiwi tipped to dip as low as US60c

Name: Reserve Bank: OCR cut to 3.25pc
Uploaded: 2015-06-11T09:46:09+12:00
Duration: 140 s
Description: The Reserve Bank has this morning cut the benchmark rate a quarter-point and signalled more may be on the way as the dairy sector's weak outlook weighed on the nation's terms of trade and threatened to delay an increase in inflation from its near-zero level. The New Zealand dollar dropped almost a cent.

NZ Herald

11 Jun, 2015 05:30 PM2 mins to read

The Reserve Bank has this morning cut the benchmark rate a quarter-point and signalled more may be on the way as the dairy sector's weak outlook weighed on the nation's terms of trade and threatened to delay an increase in inflation from its near-zero level. The New Zealand dollar dropped almost a cent.

The New Zealand dollar could fall as low as US60c against the greenback this year following yesterday's official cash rate cut, says a market strategist.

The Reserve Bank cut the OCR by 0.25 of a percentage point to 3.25 per cent in response to falling dairy prices and declining terms of trade.

Governor Graeme Wheeler warned that further cuts "may be appropriate".

"They will depend on the emerging data."

The kiwi fell almost US2c to a low of US70.13c after the cut and was trading at US70.19c at 5pm yesterday -- 20 per cent below its peak of US88.2c last July.

CMC Markets chief market strategist Michael McCarthy said the New Zealand dollar could reach US60c this year if further cuts were made to the OCR.

An expected rate hike in the United States, which would strengthen the greenback, would contribute to that weakness, he said.

The New Zealand dollar has not traded at US60c since May 2009.

ANZ said it expected at least one more OCR cut before the end of the year, with a 50 per cent chance of a second. The bank expects the kiwi to fall below US70c towards its trade target of US68c.

McCarthy said he expected the New Zealand dollar to eventually begin regaining strength against its US counterpart.

"As the global economy normalises we're likely to see currencies move back towards the middle of their longer-term ranges -- and for the kiwi that means somewhere between 70 and 80 rather than between 60 and 70."

The New Zealand dollar fell more than A2c against the Australian dollar and was trading yesterday afternoon at A90.32c.