As the Reserve Bank of New Zealand (RBNZ) began to slash rates, the New Zealand and Australian dollar posted lower on Thursday against its U.S counterpart, and there are speculations of a higher chance for more cuts.
Meanwhile, NZD/USD traded down by about 0.21% to 0.66.
The benchmark interest rate was lowered by RBNZ to 2.25% from 2.50% and has led the kiwi to post weaker. Thus, analysts anticipate the rates to remain unchanged.
Amid the proposed decision, RBNZ authority Graeme Wheeler mentioned that China is considered a big threat to global growth.
He said, "Any sharp slowing in Chinese growth could have significant implications for global growth, and for the Asia-Pacific region especially,"
The possibility of further lowering of rates depends on the economic data of New Zealand, warned by the central bank.
Wheeler said, "Whether we need another cut or whether we need more than another cut will very much depend on the data,"
AUD/USD traded down by about 0.24 and hit 0.74, suggesting a close near to the prior eight-month high of 0.75 amid session.
Investors continue to trade with caution led by the European Central Bank’s closely watched decision and the expected measures, which will be announced later in the day.
The U.S. dollar index rallied by about 0.25% at 97.43.
Euro slides against the USD
The euro drops against the dollar on Thursday, with hopes up on the European Central Bank’s (ECB) policy easing. Meanwhile, an unexpected rate cut has led the New Zealand dollar to slump a two-week low.
The ECB’s highly anticipated policy decision remained a threat to the euro zone economy, as it will continue to struggle if inflation further rises.
However, senior currency sales managers mentioned that speculators appeared only about a third as much tied up on the euro earlier than December decision, where numbers of investments were left underwater.
A strategist of UBS Daniel Trum said, "The ECB will probably try to deliver more than the market expects to get a real effect from these measures. That means that besides the rate cut that seems to be priced in by markets, we will get something on the QE side,"
He added, "But we also acknowledge that there is a risk that they under-deliver as in December, and that would obviously strengthen the euro."
The New Zealand dollar slides 2 cents after a rate cut is made by the Reserve Bank with a 25 basis points to 2.25 percent, suggesting a material drop over inflation expectation measures.
Furthermore, the central bank also signaled the potential one more rate cut approaching.
Todd Elmer, a strategist at City said, "All in, it’s a clear negative signal for the kiwi," he added, "The question is the degree to which this can extend amid a backdrop of globally rising risk appetite."
The New Zealand currency recovered by about 0.2 percent from its prior lows, but remained down at $0.66 by 2 cents from earlier lows after the decision.
The ECB is anticipated to slash deposit rates by about 10 basis points to -0.40 percent, suggesting for other decisions, and Mario Draghi, the president is expected to mostly respond in this case.
As a rate cut began, it is essential on how the ECB will respond from the negative rates, and is supported by a sell-off in bank stocks worldwide.
Meanwhile, the common currency dropped 0.3 percent, hitting $1.09, while the yen declined 0.2 percent at 124.86.
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