The New Zealand dollar fell as traders price in the chance that the Reserve Bank may cut interest rates at its meeting next week in an attempt to bolster lacklustre inflation and weaken the currency.

The kiwi slid to 69.09 US cents at 8am in Wellington, from 69.73 cents at 5pm yesterday. The trade-weighted index declined to 72.76 from 73.19 yesterday.

Traders are pricing in a 46 percent chance that Reserve Bank governor Graeme Wheeler will cut the official cash rate to 2 percent at the April 28 review while the odds of the OCR being unchanged are 54 percent, based on the overnight interest swap curve. Capital Economics yesterday added a further cut to its interest rate expectation for this year, saying the RBNZ will probably lower the rate to 1.75 percent, and said it "wouldn't completely rule out" a reduction next week although it thought June more likely. JPMorgan also said it expected 50 points of cuts ahead this year, starting next week.

See live rates for the NZ-US $ below. Click for more information:NzForex Foreign Exchange Transfers

"There are increased expectations that the Reserve Bank may do something, if not next week then at least a couple more times this year," said Jason Wong, currency strategist at Bank of New Zealand, which expects the Reserve Bank to cut next week. "People seem to be jumping back in again on the view that because the currency is way up here that it may increase the chance of the Reserve Bank going as soon as next week.


"In the short term there is more downside risk than upside risk" for the kiwi, he said.

BNZ's Wong said he sees the kiwi's fair value at around 65 to 66 US cents, saying it has been swept up by a general rise in commodity prices, which is mostly related to metals which New Zealand doesn't sell. Commodity-linked currencies were generally weaker overnight as the CRB Index, which measures a basket of global commodities, declined.
The New Zealand dollar slid to 89.24 Australian cents from 89.32 cents yesterday, fell to 61.20 euro cents from 61.74 cents, dropped to 48.21 British pence from 48.63 pence, declined to 75.62 yen from 76.48 yen and sank to 4.4777 yuan from 4.5161 yuan.