NZ dollar sinks vs. Japanese yen after Abe postpones tax hike

The New Zealand dollar sank against the yen after Japanese Prime Minister Shinzo Abe said he would delay a planned increase in the sales tax rate, damping expectations for further monetary stimulus.

The kiwi slid to 74.55 yen at 8am in Wellington, from 74.95 yen at 5pm yesterday. The local currency increased to 68.15 US cents from 67.84 cents yesterday, aided by a 3.4 percent gain in prices on the GlobalDairyTrade platform overnight.

The yen strengthened after Abe announced he would postpone increasing Japan's sales tax to 10 percent until 2019. That damped speculation that the country may add more monetary stimulus, pushing up the currency.

"Japan delayed a sales tax hike for two-and-a-half years," OMF senior dealer foreign exchange Stuart Ive said in a note. "The longer-than-expected delay raised fears that Japan was also in no hurry to weaken the yen currency through monetary stimulus."

The New Zealand dollar rose to 93.91 Australian cents from 93.24 cents yesterday ahead of Australian data on trade and retail sales for April today.

The kiwi increased to 47.28 British pence from 46.83 pence yesterday, advanced to 4.4807 yuan from 4.4734 yuan, and was little changed at 60.88 euro cents from 60.98 cents. The trade-weighted index gained to 73.48 from 73.21 yesterday.