The New Zealand dollar slipped to a six-year low against the greenback as commodity prices tumbled lower this week, and may fall further over the following week as risk aversion continues to drive price action in the currency market. Fears of a global recession paired with fading demands for high-yielding assets has clearly dragged on the NZDUSD, and the break below the 10/27 low of 0.5350 indicates that the pair has yet to find a bottom, and may test the 0.5000 level for psychological support over the near-term as investors hold a bearish outlook for the commodity currencies.
As credit conditions remain far from normal, fears of a protracted downturn in the $128B economy has already raised bets that the Reserve Bank of New Zealand will once again lower borrowing costs at the December 3rd policy meeting. A Bloomberg News survey showed that 11 of the 14 economists polled expect the central bank to cut the benchmark interest rate by 100bp to 5.50% from 6.50%, while the remaining forecasts recognize a chance for a 150bp rate cut to bring the target rate down to 5.00%.
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