The New Zealand dollar recovered today slightly, after yesterday’s decline on the earthquake in Christchurch, on the speculation that the markets overestimated the probability of interest rates cuts.
The earthquake in Christchurch, the second- largest city of New Zealand, caused death of at least 75 people and the death toll will likely rise as the rescuers comb the ruins of buildings. Prime Minister John Key said that the disaster will likely to cost the reinsurers about NZ$5 billion ($3.7 billion).
Credit Suisse AG index showed that the probability of a rate cut at the next meeting of the central bank on March 10 rose up from 28 percent yesterday to 44 percent today. Governor of the Reserve Bank of New Zealand Alan Bollard stated:
The Reserve Bank is working hard to assist the recovery as fast as possible in terms of access to financial services, and ensuring markets remain stable.
The kiwi, as the New Zealand currency is nicknamed, also rose after Moodyâs Investors Service said it’s not going to downgrade the nation’s rating because of the earthquake.
NZD/USD traded near 0.7477 as of 3:40 GMT after it dropped yesterday from 0.7635 to 0.7461. EUR/NZD traded at 1.8301 after yesterday’s surge from 1.7901 to 1.8280, while NZD/JPY traded at about 61.78 after it slumped on the yesterday’s trading session from 63.47 to 61.76.
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