Forex traders sold the New Zealand dollar as the fourth-quarter Consumer Price Index issued the first negative reading in two years, shrinking -0.5% to bring annual inflation to 3.4%, the lowest since March 2008. The Kiwi dropped close to 60 pips against the US Dollar in the 15 minutes immediately following the CPI announcement. The result boosted expectations that the Reserve Bank of New Zealand would continue to cut interest rates despite a notable shift toward neutral in the commentary that accompanied the last policy announcement. The RBNZ has trimmed 3.25% off borrowing costs to date, with traders pricing in another 175-200 basis points in easing over the next 12 months. The central bank announces monetary policy on January 29th.
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