KEY POINTS:
The New Zealand dollar fell sharply when the Reserve Bank cut its official cash rate by 50 basis points to 7.5 per cent.
A move of just 25 basis points had been expected. Economists said they were gobsmacked by the cut and their inability to read the central bank could only make financial markets more volatile.
The New Zealand dollar was at US65.15c at 5pm, down from US66.50c at 8am and US66.95c at 5pm yesterday.
It was at 69.95 yen by 5pm, down from 71.75 yen at the same time yesterday.
Bank of New Zealand currency strategist Danica Hampton said the backdrop in global markets had been unsupportive to the NZ dollar so the bigger than expected rate cut was just another reason to sell.
"The US dollar was generally firmer across the board so that set the NZ dollar up to be weaker," she said.
The market was also confused that the RBNZ forecast 90-day bank bills to fall to 6.80 per cent by March 2011, which was higher than the 6.30 per cent it had predicted in June.
The forecast was at odds with the bank's line that it had only front loaded the easing cycle rather than changing the extent of it.
The trade weighted index eased to 62.63 from 63.94 at 5pm.
- NZPA