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Will coronavirus affect Official Cash Rate announcement tomorrow?

Author
Newstalk ZB, BusinessDesk,
Publish Date
Tue, 11 Feb 2020, 6:50PM
Michael Reddell expects the virus will have an impact on the Reserve Bank's decision. (Photo / Getty)

Will coronavirus affect Official Cash Rate announcement tomorrow?

Author
Newstalk ZB, BusinessDesk,
Publish Date
Tue, 11 Feb 2020, 6:50PM

The New Zealand dollar fell further ahead of the Reserve Bank's monetary policy decision due tomorrow with investors increasingly bearish about the impact of the coronavirus crisis on the domestic economy.

The kiwi was trading at 63.87 US cents at 5pm in Wellington, off the day's low at 63.76 cents but down from 64.06 cents at the same time yesterday. The trade-weighted index fell to 70.93 points from 71.17.

"The market's getting quite beared up ahead of tomorrow. The market's definitely coming in for a more bearish statement tomorrow," said Tim Kelleher, the head of foreign exchange sales at Commonwealth Bank of Australia.

A Reuters poll of 12 economists found none of them are expecting any change to the official cash rate, currently at a record low of 1 per cent.

Reports of disruptions to supply chains into China and the rising death toll are reasons for New Zealand's central bank to remain cautious, Kelleher said.

The death toll in China passed a grim milestone to reach 1,016 in the past 24 hours while those infected rose to 42,638. A day earlier, the tally stood at 908 dead and 40,171 infected.

Most of the new deaths have been in the province of Hubei and its capital Wuhan where the disease originated in December.

Earlier today, Finance Minister Grant Robertson acknowledged the coronavirus outbreak will knock New Zealand's economy in coming months, although he also said the government accounts were in good shape to weather the impact.

"Agencies are currently assessing the potential economic impact of the coronavirus outbreak and while that work is not yet completed it is clear that there will be some impact on the New Zealand economy," Robertson said.

Bank economists are predicting the virus will shave 0.5 per cent to 0.6 per cent off GDP in the March quarter.

The New Zealand dollar was at 95.19 Australian cents from 95.61 cents at 5pm yesterday. It was at 49.45 British pence from 49.67, at 58.52 euro cents from 58.49, at 70.18 yen from 70.30 and at 4.4573 Chinese yuan from 4.4770.

The two-year swap rate fell to a bid price of 1.0625 per cent from 1.0900 yesterday while 10-year swaps were at 1.4000 per cent from 1.4100.

 

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