The New Zealand dollar dropped, touching a four-year low, after the Reserve Bank abandoned its bias for raising interest rates and said a rate cut was a possibility.
The kiwi fell to 73.27 US cents at 5pm in Wellington and earlier fell as low as 73.18 cents, from 74.52 cents late yesterday. The trade-weighted index declined to 75.83 from 76.79.
Reserve Bank governor Graeme Wheeler kept the official cash rate unchanged as expected but surprised the market by saying the next adjustment could be "either up or down".
The bank hasn't cut the OCR since March 2011 and its tightening bias has been broadly in place since 2013. Inflation could turn negative and was likely to climb back to the middle of the bank's target range "more gradually that previously anticipated."
"We and the market were surprised by the RBNZ unceremoniously dumping its tightening bias today," Stephen Toplis, head of research at Bank of New Zealand, said in a note.