NZ Dollar Drops as Business Confidence Index Falls

The New Zealand dollar dropped today, reversing yesterday’s gains, as the nation’s business confidence index dropped this month. The currency has gone virtually nowhere in the past five trading session, pausing the slide that started this month.
The ANZ Business Confidence index fell from 64.8 in April to 53.5 in May. Despite the drop, the report said that investors should not be alarmed yet, making following comments on the data:

– Optimists continue to dwarf pessimists but we’re on the slide; business confidence and other survey measures are waning.
– The level signals are still encouraging so we’re not alarmed; the economy needs to moderate from a breakneck pace if the expansion is to endure.
– Growth signals are still strong and inflation nuances non-threatening: it’s a good mix.

The New Zealand currency still looks attractive over the longer term due to the evidences of economic recovery in the country and prospects for monetary tightening from the Reserve Bank of New Zealand. But it looks like that Forex traders decided to take profit from the recent rally of the kiwi, and it means that the currency needs more good news make the rally resume.
NZD/USD dropped from 0.8560 to 0.8545, and NZD/JPY declined from 87.30 to 87.01 as of 2:16 GMT today. EUR/NZD advanced from 1.5920 to 1.5951.

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