The New Zealand dollar consolidated after falling more than half a US cent today on news that the economy expanded less than expected in the second quarter.
The lower than expected growth figure implies interest rates will remain lower for longer, which is a negative factor for the currency.
New
Zealand's gross domestic product rose 0.2 per cent in the second quarter, less than the 0.8 per cent the market was expecting and the 0.9 per cent the Reserve Bank of New Zealand was expecting.
The NZ dollar was US73.23c at 5pm, after falling to US73.15c from US73.70c just before the data was released. It was US73.59c at 5pm yesterday.
BNZ economists said the New Zealand economy was going nowhere fast and the weakness in growth was across the board and not due to any one-off factors.
BNZ has cut its forecast for the third quarter to a rise of 0.6 per cent from a rise of 1 per cent previously, citing the September 4 earthquake in Christchurch and poor climatic conditions.
"The second quarter figure was a significant margin below market expectations. Importantly it is below what the Reserve Bank factored in," said Mike Jones, a currency strategist at BNZ.
"It very much supports our view that the Reserve Bank will keep interest rates on hold until at least the end of this year," he said.
The NZ dollar fell against a range of currencies. It was at A76.59c at 5pm from A76.94c at the same time yesterday.
It slipped to 0.5466 euro at 5pm from 0.5537 at the same time yesterday and to 61.94 yen from 62.45 yesterday. The trade weighted index was down to 66.58 from 67.08 yesterday.
The US dollar remained on the defensive today as speculation that the Federal Reserve will start printing money soon drove down US interest rates.
The Fed said yesterday it was prepared to start pumping billions of new dollars into the US economy, likely via purchases of Treasury bonds, to boost growth if necessary.
- NZPA
