NEW YORK: New Zealand’s dollar plunged 1.1 US cent on Thursday after its central bank indicated a close to economic tightening in the face of slowing growth and easing inflation around the world.
In early trade, the kiwi dropped to US73.21¢ from US74.42¢, before settling around US73.32¢. There was a corresponding freefall against the Australian dollar to A92.63¢ from A93.75¢, before a slight recovery to around A92.70¢.
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The massive sell-off followed a decision by the Reserve Bank of New Zealand to hold the official cash rate unchanged at 3.5 per cent, while warning that the global outlook had deteriorated. Last year, the bank became the first in the industrialised world to tighten policy after the financial crisis, pushing the overnight rate higher by a full percentage point between March and July.
The RBNZ’s new caution follows a recent wave of monetary easing, including an interest rate cut in Canada last week, the European Central Bank’s €1.1 trillion ($1.4 trillion) bond-buying program and currency intervention by the Monetary Authority of Singapore on Wednesday.
