16 Jul 2014

Dollar drops almost one US cent

1:45 pm on 16 July 2014

The New Zealand dollar fell on Wednesday on the back of a plunge in wholesale dairy prices and weaker than expected inflation figures.

At midday Wednesday the dollar had fallen nearly one US cent to as low as US87.15 cents.

Currency dealers are now questioning whether the Reserve Bank will continue to hike interest rates.

A foreign exchange strategist at ANZ Bank, Sam Tuck, says comments by US Federal Reserve's chair, Janet Yellen, also helped drive the kiwi down.

"There's two factors driving the dollar - we had an initial move downwards thanks to some slight optimism by Yellen which was compounded by the weaker global dairy trade auction and then we've had a weaker than expected Q2 CPI which has driven the New Zealand dollar lower again.

Markets are questinoing the path for New Zealand monetary policy in the long term with our dairy prices declining some 35 percent since the peak in February."