The New Zealand dollar fell after the Reserve Bank left the door open on negative interest rates while at the same time doubling its bond buying programme to $60 billion.

The kiwi was trading at 60.11 US cents at 5pm in Wellington from 60.75 cents at the same time yesterday while the trade-weighted index was at 68.01 from 68.82 yesterday.

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The central bank held its official cash rate steady at 0.25 per cent and said it would stay there until early 2021 but, in an unusual move, although it published forecasts for economic growth and inflation, it left interest rate forecasts blank after March next year.

The bond buying programme, known as quantitative easing, is a way of printing money and effectively lowering interest rates, rather than using the OCR to do so, and the enlarged programme was exactly what the market was expecting.


However, the RBNZ said it continues to discuss with financial institutions about preparing for a negative OCR.

"They had to mention the negative rate thing – they couldn't have got away with not doing that" because otherwise the domestic currency would probably have rallied, said Martin Rudings, private client manager at OMF.

In the event, the RBNZ made clear it's prepared to do whatever is necessary to help cushion the impact of the coronavirus crisis on the economy and "that was enough to knock the kiwi off its perch."

With no international tourists and a significant part of the economy not functioning at the moment because New Zealand has its borders closed, a lower currency would help the economy by supporting export returns, Rudings said.

With global equities markets mostly weaker, that provided "a good backdrop" to help push the kiwi lower, he said.

While the RBNZ has remained open to negative interest rates, the Reserve Bank of Australia has made it clear it doesn't intend to go there.

"There's a point of difference right there. I suspect it's probably enough for the kiwi to weaken considerably against the Australian dollar now," Rudings said.

The New Zealand dollar was trading at 92.82 Australian cents from 93.95 cents at 5pm yesterday. It was at 48.99 British pence from 49.29 pence, at 55.39 euro cents from 56.20 cents, at 64.42 yen from 65.23 yen and at 4.2616 Chinese yuan from 4.3088 yuan.


The bid price on the two-year swap rate closed at 0.0800 per cent from 0.1625 per cent yesterday while 10-year swaps were at 0.5800 per cent from 0.7100 per cent.