NZ dollar drops as commodity currencies fall out of favour

NZ dollar drops as commodity currencies fall out of favour; traders eye likely RBNZ cut

By Tina Morrison

Dec. 8 (BusinessDesk) - The New Zealand dollar fell as a decline in oil prices weighed on commodity-linked currencies and as traders increased their bets for a Reserve Bank interest rate cut this week.

The kiwi dropped to 66.44 US cents at 8am in Wellington, from 66.94 cents at 5pm yesterday. The trade-weighted index slid to 72.18 from 72.46 yesterday.

Oil prices slumped to their lowest since 2009 after the Organisation of the Petroleum Exporting Countries agreed to keep production high despite depressed demand, stoking concerns the global glut would increase. That weighed on the currencies of oil producing countries such as the Norwegian krone and the Canadian dollar, as well as other commodity-linked currencies such as the New Zealand and Australian dollars.

"Commodity-linked currencies have been the worst performers over the past 24-hours," Kymberly Martin, senior market strategist at Bank of New Zealand, said in a note. "Unsurprisingly, oil-linked currencies were amongst the worst performers. The NZD/USD and AUD/USD have also not fared well."

In New Zealand this week, traders are awaiting the Reserve Bank's interest rate decision on Thursday. Some 21 of 24 economists polled by Reuters expect the Reserve Bank to cut the benchmark rate by a quarter point to 2.5 percent. Traders have increased their bets for quarter point cut to 78 percent, from 68 percent yesterday, according to Thomson Reuters data.

Today, the Crown publishes its accounts for the first four months of the new financial year, and third-quarter manufacturing data is released.

In China, November trade data will be closely watched for signs of how New Zealand's largest trading partner is tracking. Meanwhile, Australia is due to release a report on business confidence and Europe and Japan have third-quarter gross domestic product readings.

The New Zealand dollar advanced to 91.41 Australian cents from 91.27 cents yesterday, slipped to 61.29 euro cents from 61.63 cents, declined to 44.14 British pence from 44.33 pence, weakened to 81.93 yen from 82.52 yen and dropped to 4.2575 yuan from 4.2894 yuan

(BusinessDesk)

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