Forex - Kiwi slumps on surprise RBNZ cut, Australia jobs data ahead

Investing.com - The kiwi fell sharply Thursday after the Reserve Bank of New Zealand surprised markets and cut benchmark rates, signaling it is ready to act like other regional central banks in boosting growth prospects as inflation remains well in check.

NZD/USD traded at 0.7052, down 0.93%, after the decision.

The Reserve Bank of New Zealand on Thursday cut its Official Cash Rate by 25 basis points to 3.25%, the latest central bank in Asia to ease monetary policy.

The decision came as a surprise to majority of economists who expected governor Graeme Wheeler to hold the OCR at this quarterly meeting, but to signal rate cuts late in the year. Market was pricing around 60% chance of a 25 basis points cut.

Instead the New Zealand central bank signaled growing concern about the effect of falling commodity prices, especially dairy, on the country's' economy, and minimal consumer price index (CPI) inflation levels.

Up ahead, Australia reports Melbourne Institute inflation expectations and jobs data with 11,000 jobs seen added in May for a steady unemployment rate of 6.2% under a stable participation rate of 64.8%.

AUD/USD changed hands at 0.7736, down 0.03%, ahead of the data. In Japan, USD/JPY was quoted at 122.85, up 0.17%. EUR/USD was traded at 1.1312, down 0.11%.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was flat at 94.59.

Overnight, the dollar remained at three-week lows against a basket of other major currencies on Wednesday, as investors continued to lock-in profits from the greenback's broad rally last week and as trading was expected to remain quiet with no major U.S. data due throughout the day.

A selloff in European government bonds continued, with German 10-year bund yields rising to the highest levels since September 2014 earlier Wednesday.

German bund yields act as benchmarks for European financial markets and higher yields push the euro higher against the dollar. Yields rise as prices fall.

But sentiment on the euro remained fragile as Athens was expected to resume talks on a cash-for-reforms deal with its international lenders later in the day.

Greece’s bailout agreement with the European Union and the International Monetary Fund is set to expire at the end of this month and it cannot make further debt repayments without a new deal.