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NZ dollar slides again on rate cut wagers, Aussie steady
[SYDNEY] The New Zealand dollar slid for a fourth straight day on Monday as surprisingly soft inflation figures led the market to price in a higher probability of a cut in official rates next month.
The kiwi slipped half a US cent to US$0.7078 after the consumer price index rose an annual 0.4 per cent in the second quarter, below forecasts of 0.5 per cent.
Swap rates were implying around a 50-50 chance of a rate cut in August.
"Given low headline inflation, already soft inflation expectations and the strong NZD, it does look like the RBNZ will be dragged back to the easing table once again," said ANZ Bank senior economist Philip Borkin.
Most economists expect the Reserve Bank of New Zealand to cut cash rates by 25 basis points to 2.0 per cent on August 11.
Investors will be keeping a close watch on Thursday's economic update by the central bank for any clues to its August cash decision.
In contrast to the kiwi, the Australian dollar was a tad firmer at US$0.7592 with investors on the sidelines ahead of minutes of the Reserve Bank of Australia (RBA)'s July policy meeting due on Tuesday.
The Aussie was steadying after it hit a 10-week high on Friday following a batch of solid Chinese economic indicators.
New Zealand government bonds gained, pushing yields 4 basis points lower at the short end and 1.5 basis points lower at the long end.
Australian government bond futures eased a little after hitting record highs earlier this month. The three-year contract was down 1 tick at 98.470, while the 10-year contract dipped 4 ticks to 97.975.