New Zealand Dollar Under Pressure After GDP Data Makes July Rate Cut Likely

 
   By Rebecca Howard 
 

        WELLINGTON, New Zealand--The New Zealand dollar fell against several currencies Thursday when tepid first-quarter growth data pushed several economists to expect another rate cut in July and some to tip further cuts this year.
        The Kiwi fell sharply against the yen, the British pound and the Australia dollar, however, it managed to hold its own against the greenback. The U.S. dollar was under pressure in Asia after a dovish Federal Reserve statement induced broad-based weakness in the U.S. currency.
        Early in the New Zealand session, the U.S. Federal Reserve signaled that it was moving toward interest-rate increases later this year now that signs of a slowdown in economic activity are waning, but the path of rate increases could be less steep than officials anticipated. For now, the Fed said in its policy statement that a benchmark interest rate near zero, where it has been since December 2008, "remains appropriate."
        While the Fed statement helped shore the Kiwi up against the U.S. dollar, the weaker-than-expected first-quarter gross domestic product data took its toll.
        Early Thursday, data showed the economy continued to expand in the first quarter but growth was the weakest in two years, weighed by a fall in agriculture, forestry and mining. Gross domestic product rose 0.2% on the quarter in the three months to March 31, Statistics New Zealand said Thursday. On the year, GDP rose 2.6%. Both figures were below the median expectations in a Wall Street Journal poll of 14 economists, which had forecast growth of 0.6% on the quarter and 3.1% on the year.
        New Zealand's central bank lowered interest rates for the first time in more than four years this month and signaled any further rate cuts would be data dependent. Most economists were expecting the central bank to pause and assess the impact at its July review before cutting the rate in September.
        Thursday's data pushed several to change that view.
        "While there were some temporary negatives, the overall picture for domestic demand wasn't flattering. We now expect official cash rate cuts in both the July and September reviews," said Westpac Bank Senior Economist Michael Gordon. Mr. Gordon said there was also a chance of a fourth rate cut later this year.
        In late Wellington trading, the New Zealand dollar was at A$0.8928 versus A$0.9023 late Wednesday but was at US$0.6896 compared with US$0.6968.
        Write to Rebecca Howard at rebecca.howard@wsj.com, @FarroHoward
        (END) Dow Jones Newswires

        June 18, 2015 01:13 ET (05:13 GMT)

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