NZ dollar dips but rallies to US74 35c

Photo / Dean Purcell

The New Zealand dollar recovered yesterday from a fall triggered by weaker than expected growth data for the September quarter, which reinforced an expectation that the official cash rate will be on hold until at least the middle of next year.

New Zealand's gross domestic product contracted 0.2 per cent in the September quarter, with the manufacturing, construction and mining industries all in reverse, said Statistics NZ. The market was expecting a small rise, and the Reserve Bank a 0.3 per cent rise.

The NZ dollar fell from around US74.20c to US74.00c on the news but recovered to be US74.35c at 5pm, which compared with US74.20c at the same time on Wednesday.

Dealers said there was demand for the currency at lower levels. Trading is thin ahead of the Christmas holiday season.

BNZ currency strategist Mike Jones said the GDP figure was a surprise for the market.

"It probably tells us the economy is a little weaker than what people thought but it is expected to recover from here," he said.

It did not change the fact that the central bank would sit on its hands until the middle of next year and perhaps even longer than that.

The numbers were "all over the place" with big positives and big negatives in the breakdown. There was a concern that another quarter of negative growth would produce a technical recession.

The NZ dollar slipped to 61.77 by 5pm from 62.14 at 5pm on Wednesday, while the TWI was unchanged at 67.19. The NZ dollar was at €0.5669 from €0.5666 at 8am and €0.5647 on Wednesday.

- NZPA