NZ dollar lower on stocks plunge; bonds firm
Reuters - 36 minutes ago
WELLINGTON, Dec 2 - The New Zealand dollar <NZD=> fell to a 10-day low on Tuesday as a sharp downturn in stock markets stoked broad risk aversion, and investors braced for an aggressive interest rate cut later in the week.
The Reserve Bank of Australia set the scene on another round of rate cuts around the world this week by cutting its key rate by 100 basis points to 4.25 percent, saying it saw a major slowdown in the domestic economy and market sentiment was fragile. [SYA005341]
Still, the Aussie quickly overcame an initial blip lower on the news, with the New Zealand dollar likewise holding fairly steady.
"The RBA has delivered what the market expected, but the bigger picture is what's going on offshore and what's going on with equities," said Daniel Brdanovic, Senior Manager Treasury at HSBC.
Earlier the the kiwi slipped as low as $0.5250 <NZD=D4> as stock markets in Asia tracked Wall Street lower. More gloomy U.S. data on Monday had reinforced pessimistic views on the economic outlook.
The kiwi was also pressured by a firmer U.S. dollar, which benefited from Japanese demand.
At 0415 GMT, the kiwi was at $0.5297/03 compared with $0.5411/21 in late local trade on Monday. The currency posted most of its losses in offshore trade, ranging as high as $0.5312 in the local session.
New Zealand's Reserve Bank will issue its latest monetary policy decision on Thursday at 9 a.m. .
A Reuters poll has nine of 16 forecasters picking a 150 basis point cut to the 6.5 percent official cash rate, with six picking a 100 basis point reduction and one expecting a 75 point cut.
New Zealand bonds firmed, tracking a rise in U.S. Treasuries which gained after Federal Reserve Chairman Ben Bernanke said the Fed could buy government debt to spur demand.
The yield on the benchmark 10-year bond <NZ10YT=RR>, which moves inversely to its price, was 14 basis points lower at 4.86 percent.
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