The New Zealand dollar leapt when the Reserve Bank of New Zealand cut the official cash rate today by less than many investors expected.
The adoption of a "glide path" from here on in by the central bank has investors thinking rates will not fall as far in New Zealand
as previously thought.
The Reserve Bank of New Zealand cut the official cash rate to 3 per cent from 3.5 per cent.
Economists had been expecting a 100 basis point cut but in recent weeks that has reduced to between 50 and 75 basis points.
The NZ dollar rose from US50.60c to US51.35c on the rate cut news and was US51.24c by 5pm from US50.00c at the same time yesterday.
"There was disappointment with most people being short kiwi and expecting a larger cut than 50 points," Imre Speizer, senior market strategist at Westpac, said.
When the rate cut was smaller than expected those with short positions, that is people who had previously sold, purchased the currency back.
Against the Australian dollar, the NZ dollar firmed to A79.03c at 5pm from A77.75c yesterday.
The Reserve Bank of New Zealand's relatively optimistic view of the economic recovery is being questioned by economists.
The NZ dollar was higher against most currencies. It rose to 0.3995 euros from 0.3950 yesterday and to 49.35 yen from 49.25.
The trade weighted index gained to 52.50 from 51.73.
Currency rates:
NZ dlr/US dlr US51.24c US50.00c
NZ dlr/Aust dlr A79.03c A77.75c
NZ dlr/euro 0.3995 0.3950
NZ dlr/yen 49.35 49.25
NZ dlr/stg 36.92p 36.42p
NZ TWI 52.50 51.73
Aust dlr/US dlr 64.82c 64.26c
Euro/US dlr 1.2827 1.2662
US dlr/yen 96.28 98.52
- NZPA
