New Zealand Dollar Tumbles on Weak Economic Data

New Zealand dollar, Kiwi, tumbled on Monday to over a week low after data shows slump in business confidence and poor building permits.

A data of business confidence collated by ANZ Bank New Zealand fell to 7.1 in January from 23 in December, while building permits fell 8.2 percent from previous month.

The poor data fueled speculation the central bank will cut interest rates to spur growth through investments.

According to ANZ Bank New Zealand Ltd. report, Reserve Bank of New Zealand will likely reduce the official cash rate this year, after previously predicting the central bank will keep rate unchanged at 2.5 percent.

“The New Zealand dollar has become disconnected from global fundamentals, ignoring credit market woes, global growth concerns and falling commodity prices,” Sam Tuck, a senior currency strategist at ANZ Bank New Zealand in Auckland wrote in a report. “But we now expect it to reconnect, given prospects for two OCR cuts, and tightening financial conditions that suggest that the run of outperforming New Zealand data is set to end.”

The kiwi plunged 0.9 percent against the US dollar to 65.77 U.S cents as at 10:31 a.m. in Tokyo.