The New Zealand dollar sank versus its US counterpart yesterday and continued to fall today after the Federal Reserve reduced its stimulus program and signaled about possible interest rate hike next year. The kiwi was also soft against other most-traded currencies after the official report showed that New Zealand economic growth slowed last quarter more than was expected.
New Zealand gross domestic product grew 0.9 percent in the fourth quarter of 2013, missing the expected value of 1.0 percent. Moreover, the previous quarter’s growth was revised negatively from 1.4 percent to 1.2 percent. The data hurt the New Zealand currency, which is often nicknamed kiwi, despite the expectations of additional interest rate hikes from the Reserve Bank of New Zealand.
The kiwi, together with other currencies, fell against the greenback after the Fed reduced its monetary stimulus. Prospects for higher interest rates in the United States harm the attractiveness of carry trade, which relies on low borrowing costs in such countries as the USA and Japan, though the hawkish stance of the RBNZ should alleviate such concerns eventually.
NZD/USD dropped from 0.8559 to 0.8528 and NZD/JPY declined from 87.56 to 87.25 as of 7:32 GMT today. EUR/NZD climbed from 1.6152 to 1.6217 after touching the low of 1.6117.
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