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Kiwi Mixed After Biggest Economic Contraction in Almost 30 Years

June 18, 2020 at 12:56 by Vladimir Vyun

Rolled bills on the plain banknotesMarkets were rather directionless today, and the New Zealand dollar was no different. While negative domestic macroeconomic data was weighing on the currency, it managed to stay flat against some of its most-traded rivals and even to rise versus others.

Statistics New Zealand reported that gross domestic product shrank by 1.6% in the March quarter following a 0.5% increase in the previous three months. Economists were hoping for a smaller drop of 1.0%. It was the first quarterly contraction since December 2010. National accounts senior manager Paul Pascoe commented on the result:

The 1.6 percent fall surpassed quarterly falls during the global financial crisis in the late 2000s. It is the largest quarterly fall since the 2.4 percent decline in the March 1991 quarter.

Finance Minister Grant Robertson warned that the full extent of the impact of the COVID-19 pandemic and the measures to contain it on the economy will become apparent in the current quarter:

The biggest impact of the global recession and Alert Level 4 public health restrictions will be seen in the current June quarter,

On the more optimistic note, he added further:

Now, our focus is on protecting jobs and supporting the economy to recover and rebuild through the investments made in Budget 2020 and by the COVID Response and Recovery Fund. By opening up the economy quicker than forecast, we’ve got a head start on our recovery.

NZD/USD fell from 0.6456 to 0.6443 as of 12:54 GMT today. EUR/NZD traded at 1.7421 after opening at 1.7405. GBP/NZD sank from 1.9441 to 1.9326 after rising to the daily high of 1.9501 earlier.

If you have any questions, comments, or opinions regarding the New Zealand Dollar, feel free to post them using the commentary form below.

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