The New Zealand dollar edged sharply lower against its major opponents on Thursday morning in Asia following the Reserve Bank of New Zealand noted in the statement after the interest rate decision that the pace of further rate increase is “likely to be more moderate than was projected in the June Statement”.
The Reserve Bank of New Zealand hiked its Official Cash Rate by 25 basis points to 3.00 percent. The increase was widely expected by economists. It was the second straight increase of 25 basis points for the RBNZ, which raised rates to 2.75 percent to 2.50 percent on June 10.
RBNZ Governor Alan Bollard said in a statement accompanying the announcement that while “the outlook for economic growth has softened somewhat, it is still appropriate to continue to reduce the extraordinary level of support implemented during the 2008/2009 recession.”
Bollard cautioned that while annual inflation has remained near 2 percent for the past five quarters, the picture may change. “As the economy grows, inflationary pressures are expected to pick up,” Bollard said. “Given this, some further removal of monetary policy stimulus is appropriate at this stage.”
In economic news, New Zealand’s trade balance shrank in the June month to NZ$276 million, down from the previous month’s NZ$814 million. For the June quarter, the trade balance was a surplus of NZ$389 million.
For the June 2010 month, exports were up NZ$552 million or 17 percent at NZ$3.8 billion, while imports were down NZ$56 million or 1.6 percent to NZ$3.5 billion.
Extending its previous session’s downtrend, the New Zealand dollar slipped to a 6-day low of 62.93 against the Japanese yen around 9:10 pm ET. The kiwi-yen pair, which finished Wednesday’s North American deals at 63.64, is presently worth 62.98 with 62.80 seen as the next likely support level.
In Japan, retail sales were up 3.2 percent on year in June, the Ministry of Economy, Trade and Industry said today, standing at JPY 11.004 trillion. That was in line with analyst expectations following the 2.8 percent increase in May.
On a monthly basis, retail sales were down a seasonally adjusted 0.4 percent – again matching expectations following the 2.0 percent contraction in May.
The New Zealand dollar slipped to a 3-week low of 1.2399 against the aussie around 8:50 pm ET and is approaching the 1.2430 support, which could set its weakest level in more than 5 weeks. The aussie-kiwi pair that closed Wednesday’s North American deals at 1.2297 is presently quoted at 1.2393.
dollar plunged to a 9-day low of 1.8051 around 5:10 pm ET and and the pair saw a choppy trend thereafter. The euro-kiwi pair, which ended yesterday’s deals at 1.7885, is presently worth 1.8009. If the New Zealand dollar declines further, 1.8150 is seen as the next likely target level.
The New Zealand dollar also fell to a 1-week low of 0.7205 against the US dollar around 5:10 pm ET, retreating from Tuesday’s fresh multi-month high of 0.7399, and this may be compared to Wednesday’s New York session close of 0.7274. The kiwi-buck pair is presently worth 0.7219 with 0.7090 seen as the next likely support level.
The greenback was generally weak after the Beige Book on Wednesday pointed to a less-than-booming economic recovery with sluggish housing markets and sales of costly items like new cars weakening. Overall, the report was less upbeat than June’s, which detailed a moderate economic rebound.
Looking ahead, Italian business confidence, German unemployment rate and the euro-zone consumer confidence data-all for the month of July and the French PPI data for June are expected to garner market attentions in the upcoming European session.
Turning to the U.S., market focus is likely to be on weekly jobless claims data for the weekended July 24, which is scheduled to be released at 8:30 am ET.