Kiwi Falls as Prime Minister Speaks About Interest Rates Reduction

The New Zealand dollar weakened after Prime Minister John Key said that the interest rates should be reduced. The currency also fell as the tensions in Libya intensified.

Investors, interested in so-called carry trades, are drawn to New Zealand because of its relatively high interest rates. Therefore reduction of the rates would decrease attractiveness of the New Zealand dollar, or the kiwi as it’s often called. Currently the official cash rate stands at 3 percent. Analysts predict that the policy makers of the Reserve Bank of New Zealand will cut the rate by 25 basis points to 2.75 percent.

The currency also declined as the rebels clashed with the security forces loyal to the government in Libya. The ensuing wave of risk aversion across the markets hurt higher-yielding currencies, including the kiwi.

NZD/USD dropped from 0.7471 to 0.7405 as of 5:29 GMT today after declined from 0.7522 to 0.7471. EUR/NZD advanced from 1.8432 to 1.8559 after rising yesterday from 1.83335 to 1.8431.

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