Kiwi tumbles ahead of RBNZ meeting; US dollar up

London

THE New Zealand dollar tumbled to its lowest in nearly three weeks on Tuesday after the country identified its first Covid-19 case since February, prompting the government to announce new short-term lockdown measures.

The currency fell sharply in early Asian trading hours, extending losses around 0630 GMT when Prime Minister Jacinda Ardern said that Auckland - where the case was reported - would go into lockdown for seven days, while New Zealand as a whole will have the toughest level of lockdown for three days.

At 1126 GMT, the New Zealand dollar was down 1.4 per cent at US$0.6927, its lowest in 20 days and on track for its biggest daily fall since May. New Zealand has followed a go-hard-and-early strategy that has helped it virtually eliminate Covid-19 domestically, allowing people to live without restrictions although its international borders remain largely closed.

The news came just a day before the country's central bank, the Reserve Bank of New Zealand (RBNZ), is widely expected to become the first among developed countries to raise interest rates since the pandemic as its economy booms.

The market for interest rate swaps suggested the probability of a quarter-point rate hike fell to 85 per cent, from more than 100 per cent. Analysts at Australia's Westpac and New Zealand's ASB Bank said that the RBNZ was likely to keep the rate steady.

Elsewhere, the tone in currency markets was generally risk-averse, as European stock indexes were in the red. Asian shares were rattled by concerns about China's plans to regulate the Internet sector, the latest move in a crackdown on the country's powerful tech companies.

The US dollar was up 0.1 per cent at 92.701, after gaining in the previous session. The euro was steady against the dollar at US$1.1771.

The Australian dollar fell to a nine-month low after central bank meeting minutes were seen as dovish and by 1138 GMT was down 0.6 per cent on the day at US$0.7293.

The minutes showed the Reserve Bank of Australia, which surprised markets by sticking to its plan to start tapering bond buying, would be prepared to take policy action, should coronavirus lockdowns across the country threaten a deeper economic setback.

The safe-haven Japanese yen and the Swiss franc were close to the previous session's 10-day high versus the dollar. REUTERS