The New Zealand dollar fell sharply against the dollar on Wednesday, its biggest one-day decline in seven weeks. Earlier, the Bank of New Zealand hinted at possible interest rate cuts, becoming the latest central bank to turn to doves at a time of slowing global economic growth.
The Bank of New Zealand abandoned its neutral stance in assessing policy on Wednesday, accidentally saying that its next interest rate change is more likely to cut interest rates.
The global economic slowdown and the sudden suspension of policy tightening by the Federal Reserve have raised expectations of interest rate cuts in Asia, and the market is betting that more and more Asian central banks will take interest rate cuts.
The New Zealand dollar NZD = fell 1.46% to $0.6804 and the Australian dollar AUD = fell 0.67%.
"Market expectations (the Bank of New Zealand) will hold the pigeon view, because other developed market central banks also hold the pigeon view." Thierry Wizman, Macquarie's global interest rate and foreign exchange strategist in New York, said.
"The Bank of New Zealand has followed the Federal Reserve into the dove camp, and it is becoming increasingly clear that few central banks are willing to stand on the opposite side of the Federal Reserve." Brad Bechtel, global head of foreign exchange at Jefferies, said.
The Federal Reserve abruptly ended its three-year monetary tightening last week amid signs of economic slowdown. Since then, the European Central Bank, the Bank of Australia and the Bank of Japan have all become doves.
Hot Model No.: