The New Zealand dollar fell as investors rethink the globally low interest rate environment with a Bank of England senior official joining the growing chorus of central bankers musing on the end to ultra-loose monetary policy.
The kiwi dropped to 72.91 US cents as at 8am in Wellington from 73.18 cents yesterday. The trade-weighted index declined to 78.05 from 78.37.
Stocks on Wall Street fell and the yield on 10-year US Treasuries rose 5 basis points to 2.27 per cent as investors took on board the growing number of central bankers signalling a move to higher interest rates after extraordinarily loose policies for almost a decade.
The US Federal Reserve has already started raising rates as the world's biggest economy continues to show robust growth, and BoE chief economist Andy Haldane is the latest among central banker officials to say higher rates need to be looked at seriously to head off inflation. The European Central Bank yesterday played down comments by president Mario Draghi earlier in the week that had also been seen as 'hawkish'.
"The tonal tide is turning in the central bank halls in London, Frankfurt and DC," ANZ Bank New Zealand senior rates strategist David Croy said in a note. "Haldane's reiteration overnight that 'we need to look seriously at the possibility of raising interest rates' has added fuel to FX moves, and it is this changing major market central bank vibe that is at the heart of our cautious NZD view."
