AUROA: The New Zealand dollar weakened against the other major currencies in the Asian session on Monday amid expectations that the Reserve Bank of New Zealand is likely to cut its official cash rate as part of the government measures to curb Auckland’s rising housing market prices.
The government announced on Sunday that it will give the Inland Revenue Department an extra USD29 million in this year’s budget to chase property investors.
It will also tighten rules on investment gains and link transactions to IRD numbers while it assesses a withholding tax for foreigners, the government said.
The new tax measure is in a response to tackle the growing fears about the property prices in Auckland.
Traders speculate that the new tax measures and tightening lending rules may pave the way for the central bank to cut its interest rate at the June 11 meeting.
In other economic news, data from Business NZ showed that the services sector in New Zealand continued to expand in April, albeit at a slower pace, with a PMI score of 56.5. That’s down from 57.6 in March, although it remains well above the boom-or-bust line of 50 that separates expansion from contraction.
Friday, the NZ dollar was trading lower against its major rivals, following the nation’s biggest dairy company Fonterra revising down its supply forecast. The NZ dollar fell to 0.40% against the US dollar, 0.16% against the yen and 0.49% against the euro on Friday.
In the Asian trading today, the NZ dollar fell to more than a 3-month low of 1.5404 against the euro, from Friday’s closing value of 1.5339. The kiwi may test support near the 1.59 region.
Against the US dollar and the yen, the kiwi dropped to 5-day lows of 0.7416 and 88.76 from last week’s closing quotes of 0.7465 and 89.16, respectively. If the kiwi extends its downtrend, it is likely to find support around 0.71 against the greenback and 87.10 against the yen.
Against the Australian dollar, the kiwi slipped to a 4-day low of 1.0799 from Friday’s closing value of 1.0734. On the downside, 1.10 is seen as the next support level for the kiwi .
Looking ahead, Federal Reserve Bank of Chicago President Charles Evans is expected to speak about the economy and monetary policy at the Swedbank Global Seminar in Stockholm at 2:00 am ET.
In the European session, Swiss retail sales data for March is slated for release.
In the New York session, US NAHB housing market index for May is set to be published.
