New Zealand dollar weakens after rate cut

The New Zealand dollar weakened against the pound overnight and fell to a 7 week low against the aussie, after the Reserve Bank of New Zealand cut interest rates by 50 basis points, to a historic low of 2.5 percent. The central bank indicated in its statement that it would keep rates low until 2010 to help fight the country's deep recession. With expectations that Australian interest rates are nearing their bottom, the aussie yield attraction is now becoming much more attractive than the kiwi's. This essentially means foreign investors looking for riskier assets may start to defer to the aussie instead of the kiwi.