The New Zealand dollar was little changed as ominous headlines on the spread of coronavirus took the oomph out of the rally inspired by the optimistic take the Reserve Bank delivered on the economy yesterday.

The kiwi was trading at 64.50 US cents at 5pm in Wellington from 64.58 cents at the same time yesterday, after having risen as high as 64.87 cents overnight. The trade-weighted index was unchanged at 71.59.

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Confirmed cases in China have almost reached 60,000 and the death toll has reached 1,355. That's a big jump from the 45,169 cases and 1,135 deaths reported yesterday.

International ratings agency Standard & Poor's is forecasting that the virus - covid-19 - will shave 0.5 per cent off Australia's GDP in 2020, said Pat Gilligan, a director at Forex.


"The issue for the kiwi is all these stories coming out about the spread of the virus," Gilligan said. The pressure will stay on both the kiwi and Aussie currencies until there's clear evidence the outbreak has been controlled, he said.

Today, the RBNZ's chief economist Yuong Ha acknowledged the central bank's forecasts are more optimistic than those of market economists.

As well as putting the kibosh on any idea that it might cut rates further, the RBNZ said annual growth is expected to accelerate to a 3.1 per cent pace in the December 2020 quarter.

"We fully understand that's on the optimistic side of where the market is. Time will tell who is right," RBNZ chief economist Yuong Ha told BusinessDesk today.

ANZ Bank economists, for example, forecast annual GDP growth of 2.5 per cent over the same period.

Ha said some of the forces supporting growth are the fact that monetary policy stimulus has kicked in after the RBNZ cut the official cash rate by 75 basis points last year to 1 per cent, house prices are lifting, and asset prices are lifting.

"The wealth channel we rely on is alive and kicking," he said.

However, another international ratings agency, Fitch, is maintaining its forecast that the RBNZ will cut the OCR to 0.75 per cent this year.


"We believe that New Zealand will be unable to avoid the effects of the novel coronavirus outbreak in China and that the likely damage to its exports and tourism sectors will force further monetary easing from the RBNZ," Fitch said.

The Reserve Bank of Australia took a similarly optimistic line last week when it delivered its latest monetary policy decision.

Gilligan said the central banks "don't want to panic everybody" with the Australian economy starting to demonstrate a turn-around and the latest raft of New Zealand data having been on the strong side.

"It's too early and there are too many unknowns for them to act yet," he said.

The New Zealand dollar was at 95.97 Australian cents from 95.99 cents at 5pm yesterday. It was at 49.79 British pence from 49.84, at 59.35 euro cents from 59.17, at 70.84 yen from 70.93 and at 4.5010 Chinese yuan from 4.4962.

The two-year swap rate climbed to a bid price of 1.1600 per cent from 1.1550 yesterday while 10-year swaps rose to 1.5300 per cent from 1.5050.