(Bloomberg) -- New Zealand’s dollar dropped after the nation’s central bank said a gauge of inflation expectations plunged to its lowest level in almost 22 years, bolstering speculation that policy makers will have to cut interest rates.
The kiwi weakened against all except one of 16 major peers as a quarterly survey of businesses published on the Reserve Bank of New Zealand
’s website showed two-year ahead inflation expectations fell to 1.63 percent from 1.85 percent. That’s the lowest since the second quarter of 1994 and well below the 2 percent midpoint of the central bank’s 1-3 percent target range.
“Two-year ahead inflation expectations aren’t a data point that moves many currencies, but the New Zealand release has taken off most of a percent from the Kiwi dollar,” Kit Juckes, a strategist at Societe Generale SA in London, wrote in an e- mailed note. “Not a big data point and a bigger reaction than I’d have expected, but a catalyst for a move we think has further to go over time.”
The New Zealand currency slid 0.7 percent to 66.05 U.S. cents at 8:49 a.m. in London, after dropping as much as 0.9 percent.
The slide in the kiwi was at odds with moves in the foreign exchange market Tuesday that saw the currencies of commodity- producing nations as the best performers. It tumbled 1.4 percent versus Canada’s dollar and 1.2 percent against Australia’s currency. Societe Generale’s Juckes recommends that investors bet it will fall further against both.