(27 June 2016 – New Zealand) The Kiwi dollar dropped to a 10-day low against the greenback following the UK’s vote leave the European Union. The drop increases the chance that the Reserve Bank of New Zealand may cut interest rates.
The New Zealand dollar fell to US$0.7080 this morning, down from 71.30USc on Friday in New York.
“It's too early to judge that the worst is over – indeed it probably isn't over,” said Bank of New Zealand currency strategist Jason Wong.
“The political turmoil in the UK that has developed over the weekend and the months of uncertainty ahead suggest that a period of subdued risk appetite is likely to develop over coming weeks, which suggests more downside potential for risk assets and the NZ dollar.”
ANZ Bank New Zealand senior economist Philip Borkin said the 'Brexit' vote will also hit commodity prices and credit markets.
“There would obviously be growth implications from weaker commodity prices, tighter credit markets, and a strong NZ dollar,” Borkin said. “Whatever the case, the odds of an August OCR cut have increased.”