The New Zealand dollar dropped one US cent on Thursday after the country's central bank signalled more interest rate cuts due to stubbornly low inflation at home and worries about global economic growth. The New Zealand dollar skidded to $0.6437 from $0.6526, pulling closer to a four-month trough of $0.6348 touched last week. A break below that level will target the September low of $0.6235.
Much of the damage came after the Reserve Bank of New Zealand (RBNZ) kept rates on hold at 2.5 percent but delivered an easing bias just two months after suggesting that it would not cut rates further. "The RBNZ said more easing may be needed over the coming year as inflation targets will take longer to reach with many risks around the outlook," said Stuart Ive, private client manager for OM Financial. The kiwi has dropped 5.5 percent this year but remained well above a trough of under 62 cents tested in August.
The kiwi skidded more than 1-1/2-cent against its Aussie neighbour, which jumped to its highest since early December at NZ$1.0934. All that buying helped support the Australian dollar against its US counterpart during a choppy session. It was steady at $0.7030, having gained 0.3 percent on Wednesday. It touched a seven-year trough of $0.6828 last week, and remains vulnerable to slowing growth in China and diverging interest rate policies. The Aussie held gains against the pound which skidded to a seven-month trough of A$2.0131 on Wednesday on growing expectations of easing by the Bank of England. It was last at A$2.0253.
New Zealand government bonds were mixed, with yields a touch lower. Australian government bond futures were subdued, with the three-year bond contract off two ticks at 98.080. The 10-year contract eased one tick to 97.3150, while the 20-year contract added one tick to 96.8300.