The New Zealand dollar fell as downbeat business confidence and soft building intentions stoked expectations for deeper interest rate cuts than previously thought, while the Greek debt impasse continued to sap investors' appetite for riskier assets.
The kiwi fell to 68 US cents at 5pm in Wellington from 68.60 cents at 8am and 68.33 cents yesterday. The trade-weighted index declined to 71.13 from 71.69.
New Zealand firms grew pessimistic about the country's economic outlook for the first time in four years in the ANZ Business Outlook, while separate government showed new building consents were flat in May. That prompted Deutsche Bank New Zealand to predict a fourth cut to the official cash rate, which it sees falling to 2.5 percent at the October meeting. Traders are pricing in 49 basis points of cuts to the OCR over the coming 12 months, according to the Overnight Index Swap curve.
"We saw competitors call for a fourth cut this year and that upped the ante," said Sam Tuck, senior FX strategist at ANZ Bank New Zealand. "ANZ still expects three cuts this year, but markets were quite interested in that so kiwi was under pressure."
The impasse over Greece's 1.6 billion euro debt owed to the International Monetary Fund continued to keep investors wary of riskier assets, such as the kiwi. Greece is holding a referendum on a bailout plan this week, which European leaders have called a vote on whether the Mediterranean nation will stay with the euro.
