The New Zealand dollar managed to rise when the Reserve Bank cut the official cash rate by 100 basis points to 6.5 per cent today.
It was not what usually happens when interest rates are cut but there was a rumour in London overnight that the cut was
going to be 200 basis points.
The NZ dollar was trading around US58.30c prior to the cut and rose to a high of US59.75c before retreating to US59.04c at 5pm. It was US60.20c at 5pm yesterday.
The NZ dollar had fallen overnight as the United States currency raced to a two-year peak against a basket of currencies as world equity markets continued to be volatile.
The interest rate cut by the Reserve Bank was also well received because it is seen as a response to the turmoil in global markets.
"It is more of a case that they are putting some insulation in around any global slowdown," said Jake Soanes, head of financial market sales at Westpac.
He said the official cash rate was regarded as "neutral" around current levels.
But the NZ dollar is again under pressure from the rising US dollar and that is not expected to change until global markets settle down and investors become less risk averse.
The yen was also benefiting from an exodus out of risky assets.
The kiwi was at 57.18 yen from 60.20 yesterday, and 0.4630 euro from 0.4662.
Against the Australian dollar, the kiwi was buying A89.35c around 5pm from A89.40c at 5pm. The trade weighted index was 59.62 from 60.63 at 5pm.
- NZPA
