Australian dollar sinks to 10-year low following NZ central bank rate cut

The Australian dollar has plummeted to its lowest level since the height of the Global Financial Crisis in 2009, after the Reserve Bank of New Zealand (RBNZ) surprised the market by cutting interest rates by 0.5%.

While several economists foresaw an interest rate cute, most expected a 25-basis points move by the RBNZ. Meanwhile, the Reserve Bank of Australia (RAB) held its cash rate at 1.0% on Tuesday.

“Heightened uncertainty and declining international trade have contributed to lower trading partner growth,” said RBNZ governor Adrian Orr. “Central banks are easing monetary policy to support their economies.”

However, the move by RBNZ stifled investors and sent the Australian dollar tumbling against the US dollar to a low of 66.77 US cents at 1:19pm (AEST), before recovering slightly to 66.98 cents an hour later.

CommSec’s chief economist Craig James said the lower dollar would come as a relief for the RAB and other economic policymakers, even if it may be a nuisance to Australians travelling overseas.

“The weaker Aussie will increase the attractiveness of Australian goods on the global stage and against imported products,” he wrote in a note.