11th June 2015
The New Zealand dollar collapsed to a five-year low after a surprise rate cut from the Reserve Bank of New Zealand. Meanwhile, the Bank of Korea also cut its key policy rate to its lowest level ever.
In early London trade, the kiwi was on track to post its largest daily loss in four years versus the US dollar. The move lower was compounded by the disparity between central bank policies of the two nations. New Zealand’s central bank hinted at a cycle of monetary policy easing, while the outlook for the US Federal Reserve is decidedly hawkish.
Meanwhile, stocks in South Korea were lifted by its central bank’s move to cut rates to a record-low of 1.5 per cent. The Bank of Korea said it was moved to act due to slack demand and the effect of an outbreak of Middle East Respiratory Syndrome.
The disease entered South Korea in the middle of May. Since then, there have been 122 reported cases of the disease and ten deaths.
Aside from the effects of disease, underlying both rate cuts was a slackening in global demand - in particular, from China.
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