8 Mar 2012

NZ dollar falls after Reserve Bank announcement

6:43 pm on 8 March 2012

The New Zealand dollar fell by as much as 0.5 cents against the US currency after the Reserve Bank said the strong currency reduces the need for rate hikes.

The central bank kept the official cash rate unchanged at 2.5% on Thursday, where the Reserve Bank Governor Allan Bollard said the strong Kiwi is undermining the country's export led recovery.

Dr Bollard says future cuts in the cash rate are possible, if the dollar remains high.

ANZ chief economist Cameron Bagrie says the Reserve Bank is showing greater willingness to keep interest rates low, for longer.

He says the Reserve Bank has made it clear that the longer the currency remains up, the lower the Official Cash Rate will remain for some time.

Mr Bagrie says the high currency frustrates the growth picture for New Zealand, the export sector and dampens inflation.