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NZ Dollar Sold Half A Cent After "Dovish" RB Statement

Fuseworks Media
Fuseworks Media

Wellington, April 24 NZPA - The New Zealand dollar fell around half a cent after markets interpreted today's Reserve Bank statement on interest rates as "dovish".

Reserve Bank Governor Alan Bollard, as expected, left the cash rate at 8.25 percent. However, in his commentary, he left out the word "significant" when he said interest rates would have to stay up for a time yet. Seven weeks ago when he previously reviewed the OCR, Dr Bollard said he expected rates to remain at current levels "for a significant time yet".

"There was an underlying telegraph to the market that there was a softening ahead," said ANZ Bank senior dealer Mark Elliott.

"The market took it as a green light to sell the kiwi."

The kiwi, which had traded as high as US80c ahead of the statement, fell to US79.15c. It closed the session on US79.40c.

Asked if today's move could be the beginning of a long-term downtrend, Mr Elliott said if the currency broke below US78c, that would be a fair assumption.

But he noted speculative players had gone into today's statement long on expectations of a more hawkish statement and when that was not delivered they sold.

The US dollar had also staged something of a revival.

Against the Australian dollar, the kiwi closed near a 5-1/2-month low of A83.80c.

Yesterday, Australia's annual inflation rate soared above 4 percent for the first time in almost seven years, increasing the risk of another rate rise from the Reserve Bank of Australia in coming months.

The kiwi strengthened against the euro to 0.5010 from 0.4996 at 5pm yesterday while the trade weighted index fell to 70.44 from 70.58.

The euro fell against the US dollar, extending the previous day's sharp drop, as investors trimmed positions before German corporate sentiment data that could provide more clues on the health of the economy in the euro zone.

The single currency had reached an all-time high above $US1.60 earlier this week after hawkish comments from ECB Governing Council member Christian Noyer led investors to ponder whether the ECB's next move would be to raise rates rather than cut them.

NZPA WGT Reuters sml ob

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