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NZ Dollar Weakens After Reserve Bank Says Rates Unchanged Until at Least 2020

James Hyerczyk
“We expect to keep the OCR at this through 2019 and into 2020, lower than we projected in our May Statement,” RBNZ Governor Adrian Orr said in the opening lines of the statement.

The New Zealand Dollar is under pressure early Thursday after the Reserve Bank signaled it will leave the official cash rate (OCR) unchanged until at least 2020, as concerns around the economy build.

The RBNZ left its benchmark interest rate unchanged as widely expected by economists and traders, however, it was the bank’s guidance calling for low rates for considerably longer than most forecasters were predicting, that is driving the Kiwi lower.

“We expect to keep the OCR at this through 2019 and into 2020, lower than we projected in our May Statement,” Governor Adrian Orr said in the opening lines of the statement.

“The direction of our next OCR move could be up or down.”

Asian Equity Markets

Asian markets are trading mixed early Thursday after Wall Street finished mostly unchanged following the imposition of new Chinese tariffs on American goods.

At 0105 GMT, Japan’s NIKKEI is trading 22540.50, down 103.81 or -0.46%. Australia’s S&P/ASX 200 is at 6263.00, down 5.50 or -0.09% and China’s Shanghai Index is at 2743.08, down 0.09 or 0%.

In Japan, a decline in automakers was the biggest drag on the NIKKEI. A steep drop in crude oil prices is pressuring Australia’s energy subindex.

Crude Oil

U.S. West Texas Intermediate crude oil fell to a 7-week low on Wednesday, pressured by an escalating trade dispute between the United States and China, weak Chinese import data and a smaller-than-anticipated drop in American crude stockpiles.

China on Wednesday threatened to slap a 25 percent tariff on $16 billion of U.S. goods. The move came in response to the Trump administration’s plan to slap the same tariff on an equal amount of Chinese imports in the coming weeks.

The list of U.S. goods released by China on Wednesday includes diesel, fuel oils and other petroleum products.

U.S. Dollar

The U.S. Dollar rose against a basket of major currencies before retreating into the close. The price action suggests bullish investors are waiting for the next catalyst to drive the dollar through its July high. For several months, the greenback had been supported by rising interest rates. Last week, it was driven higher by safe-haven buying tied to trade war fears.

Canadian Dollar

The Canadian Dollar was in the news on Wednesday as Canada’s dispute with Saudi Arabia escalated. The so-called Loonie retreated to a two-week low against the U.S. Dollar after the Financial Times reported that the Saudi Central Bank and pension funds had instructed their overseas asset managers to dispose of Canadian assets.

British Pound

The Sterling fell to its lowest levels in almost a year on Wednesday on concerns about Britain’s exit from the European Union. The British Pound declined as investors ramped up bets on Britain leaving the EU without an agreement with Brussels. Essentially, traders are slowing starting to price in greater chance of a “no deal” type scenario with Brexit.

This article was originally posted on FX Empire

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