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NZ dollar falls sharply after Reserve Bank statement

Fuseworks Media
Fuseworks Media

Wellington, Sept 16 NZPA - The New Zealand dollar fell sharply against the US and Australian dollars after the Reserve Bank this morning held the official cash rate (OCR) at 3 percent but signalled a longer pause in rate increases than expected.

Releasing the September Monetary Policy Statement, Reserve Bank Governor Alan Bollard said the pace and extent of further OCR increases was likely to be more moderate than was projected in the June MPS.

He said that while global and domestic economies continued to recover, the outlook had weakened since June.

The Canterbury earthquake had significantly disrupted economic activity and was likely to continue to do so for some time yet.

The New Zealand dollar immediately slipped half a US cent to around US73.66c and more than A1c against the aussie to around A77.50c -- its lowest level since April.

BNZ markets strategist Mike Jones said the fall in the kiwi looked appropriate following the MPS.

"The statement was very dovish and the Reserve Bank has taken an axe to its interest rate forecasts, implying we won't see any more interest rate increases in 2010," he told NZPA.

"That was probably more dovish than markets had expected and the currency has fallen accordingly."

The New Zealand dollar's trade weighted index dropped to 66.99 an hour after the MPS, from 67.35 at 8am.

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