The New Zealand dollar slumped to four-year lows on Thursday as investors priced in a greater chance of rate cuts there, while U.S. dollar bulls focused on the positive in the Federal Reserve’s latest policy statement.
The kiwi skidded to $0.7320 after the Reserve Bank of New Zealand opened the door to a possible cut in rates, having only last month flagged that further tightening was needed. Traders said the move to a neutral stance was expected, but giving an allowance for rate cuts was not.
“For the NZ dollar, a further repricing of RBNZ rate expectations will imply a period of under performance against the G10 crosses, especially given that a number of markets have already undergone a significant repricing of policy expectations in recent months,” JPMorgan analyst Sally Auld said.
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