New Zealand dollar off lows as RBNZ disappoints uber-doves
Adds RBNZ comments, analyst reaction
By Wayne Cole
SYDNEY, Nov 27 (Reuters) -The New Zealand dollar bounced on Wednesday, after the country's central bank lowered interest rates for a third straight meeting, but disappointed doves who had wagered on a super-sized move.
The Reserve Bank of New Zealand chopped its cash rate by 50 basis points to 4.25%, marking 125 bps of easing in just four months.
Economists had overwhelmingly tipped a half-point move this week, but markets had priced in around a 40% chance the RBNZ would slash rates by a whopping 75 bps. 0#NZDIRPR
The resulting short-covering saw the kiwi dollar rise 0.6% to $0.5866 NZD=D3, and away from a 13-month trough of $0.5797 hit on Tuesday.
Still, RBNZ Governor Adrian Orr left the door open to another half-point cut at its February meeting should the economy perform as expected.
"Barring negative shocks, we continue to see the RBNZ reverting to a more standard pace of cutting, 25bp per meeting, from February," said Sharon Zollner, chief NZ economist at ANZ.
"If the data comes in soft, then the RBNZ will clearly not hesitate to deliver another 50 bp cut."
Markets imply around a 37% chance of a half-point move, and has rates down around 3.35% by the end of next year. 0#NZDIRPR
Two-year swap rates NZDSM3NB2Y= rose 7 bps to 3.6650%, after sliding 12 bps last week. Yields on 10-year bonds NZ10YT=RR edged up 3 bps to 4.560%.
The Aussie dollar was a shade firmer at $0.6480 AUD=D3, having touched a four-month trough of $0.6434 on Tuesday as the U.S. dollar benefited from talk of tariffs. Support lies around $0.6400 and the August low of $0.6349.
It was restrained by a 0.7% drop against the kiwi AUDNZD= after the RBNZ move.
In Australia, data showed the monthly consumer price index for October held at an annual pace of 2.1%, under forecasts of 2.3%. The headline CPI has been massaged lower in part by government rebates on electricity bills, which are temporary.
Core inflation, however, is more elevated at 3.5% putting it some way above the Reserve Bank of Australia's target band of 2-3% and an impediment to rate cuts.
The central bank has repeatedly stated that policy needs to stay restrictive until it is confident core inflation will slow to around 2.5% in a sustainable fashion.
This is why markets are pricing in only a 12% chance that the RBA will cut its 4.35% cash rate at its next meeting on Dec. 10, and just a 21% probability of a rate reduction in February. 0#AUDIRPR
Reporting by Wayne Cole; Editing by Sherry Jacob-Phillips and Rashmi Aich
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