- NZD/USD extends early losses as analysts warn of negative rates in New Zealand.
- RBNZ may cut rates to levels below zero in November, according to Westpac’s analysts.
- Talk of negative rate overshadows optimism on the COVID-19 front.
The New Zealand dollar (NZD) is being offered in Asia, possibly due to speculation that the Reserve Bank New Zealand (RBNZ) may have to cut rates into the negative territory in November.
The NZD/USD pair is now trading at session lows near 0.60, representing a 0.70% drop on the day, having declined from 0.6048 to 0.6030 during the early Asian trading hours.
The RBNZ said in March that it would keep the official cash rate at 0.25% for at least 12 months. However, the outlook has deteriorated since then and the central bank would feel compelled to do more for the economy, both Westpac chief economist, Dominick Stephens, and Triple T Consulting founder and managing director, Sean Keane, said early Tuesday, according to Interest.co.nz.
Westpac’s Stephens thinks the RBNZ would begin preparing markets for negative rates from August and would deliver a 75-point cut to -0.5% in November. It’s worth noting that the central bank is already running a $33 billion quantitative easing (QE) program, which too, could be expanded.
The dovish RBNZ expectations could continue to overshadow the progress on the coronavirus front and keep the NZD under pressure.
New Zealand’s Prime Minister Jacinda Ardern said on Monday that the coronavirus was “currently” eliminated. “The country moved to level 3 at 11.59 PM on Monday, easing some of the restrictions of the level-4 living of the past four-and-a-half weeks – including another 400,000 Kiwis returning to work and the lifting of fast-food restrictions,” said the New Zealand Herald.