NZ dollar slumps, rebounds as markets digest RBNZ’s economic risk outlook

Wednesday 13th November 2013

The New Zealand dollar slumped to a two-month low after the Reserve Bank highlighted risks facing the economy in its Financial Stability Report released this morning.

The kiwi dropped as low as 81.66 US cents from 82.23 cents immediately before the 9am release of the report. It has since recovered some of its ground, trading recently at 82.05 cents.

The Reserve Bank in its six-monthly report highlighted risks to the nation's economy from a sharp slowdown in China, a housing imbalance, a funding imbalance, the dairy sector and a worsening external deficit. It said the New Zealand dollar remains elevated.

"The kiwi has dropped off because of the increased rhetoric about the risks that the New Zealand economy faces," said Sam Tuck, senior manager FX at ANZ New Zealand. "It's just an initial dip based on the general negativity of some of the headlines."

Tuck said he expects the kiwi to bounce back.

"Everything I am hearing is saying that we are going to have to increase interest rates and aside from the housing market, the economy is pretty reasonable."

BusinessDesk.co.nz

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