WELLINGTON: The New Zealand dollar plunged on Wednesday after a shockingly low reading on inflation.
The New Zealand dollar fell by $0.7633, having tumbled a cent and a half from Tuesday’s peak as inflation slowed to 0.8 per cent in the fourth quarter.
That was below the Reserve Bank of New Zealand’s 1-3 per cent target zone and challenged the central bank’s view that further tightening might be needed at some stage.
“The market is looking to price out the prospect of rate hikes in the foreseeable future and in fact is looking to price in the prospect of rate cuts,” said BNZ currency strategist Raiko Shareef.
Swap markets swung to pricing 2 basis points of easing on a 12-month horizon, from 4 bases of hikes on Tuesday.
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