NZ Dollar tumbles to lowest point in more than two years

Wellington: The New Zealand dollar has fallen nearly two per cent to US$0.6613 (FJ$1.40) its lowest level since March 2016. The tumble was in response to the Reserve Bank of New Zealand unexpectedly committing to keep interest rates at record lows through to 2020 on disappointing economic activity.

Reuters described the New Zealand dollar as being the “big mover” among currencies.

Effectively, a lower dollar means that goods imported to New Zealand will be more expensive.

Equally, New Zealand exports become more competitive in price meaning that exporters can see an increase in demand. New Zealand consumers often notice a lower dollar first in rising costs of going overseas.

At the same time as the Kiwi dollar fell, the US dollar rose against most currencies as investors bet that it may have the upper hand over emerging market currencies in a trade war. Yesterday, the (NZ) Reserve Bank left the cost of borrowing at 1.75 per cent for the 12th time in a row, and indicated it may now stay there until late 2020. Economic growth has slowed recently, but the Reserve Bank governor Adrian Orr said it’s expected to pick up while inflation is also rising.