Kiwi Plunges Against Dollar After RBNZ Left Rate Unchanged

• Kiwi Plunges Against Dollar After RBNZ Left Rate Unchanged

The Reserve Bank of New Zealand (RBNZ) left interest rate unchanged at 1.75 percent on Thursday.

According to the RBNZ Governor, Graeme Wheeler, the positive business outlook and consumer sentiment in advanced economies have increased the global economic outlook.

However, the governor stated that the rising geo-political uncertainty and ongoing surplus capacity in the global economy remain a challenge.

The surge in commodity prices has pushed global headline inflation up a notch, while global long-term interest rates have increased. But monetary policy is expected to remain stimulatory, and less so going forward, especially in the USA.

“The exchange rate remains higher than is sustainable for balanced growth and, together with low global inflation, continues to generate negative inflation in the tradable sector. A decline in the exchange rate is needed.” the Governor stated.

“Economic growth in New Zealand has increased as expected and is steadily drawing on spare resources. The outlook remains positive, supported by ongoing accommodative monetary policy, strong population growth, increased household spending and rising construction activity. Dairy prices have recovered in recent months but uncertainty remains around future outcomes.”

The New Zealand dollar dropped against the US dollar after the report was made public to trade at 72.01. The currency has dropped about 74 pips to trade below 0.7253 psychological level.