New Zealand dollar sinks on big drop in house sales

The New Zealand dollar is copping it in the neck for a second day, this time as data showed house sales fell by the most in just over six-and-a-half-years.

Sales fell 31 per cent year-on-year in April, from a 10.7 per cent drop the previous month, according to the Real Estate Institute of New Zealand.

By this measure, the Land of the Long White Cloud has not experienced positive sales growth since June last year, and April’s fall was also the steepest since October 2010, when sales contracted by 35.9 per cent.

The kiwi dollar is down 0.2 per cent at $0.6835 making it the worst-performing major currency by a wide margin for the second session in a row. It is now at its lowest level since early June last year.

Yesterday, the currency closed 1.3 per cent lower, the biggest one-day drop since November’s US presidential election, after the Reserve Bank of New Zealand kept interest rates steady but issued a more dovish policy statement than expected. While the interest rate decision was expected, the commentary caught investors off-guard, prompting the severe reaction for the kiwi dollar.

Ray Attrill at National Australia Bank said the NZ dollar has struggled to pick itself up off the floor in the wake of the RBNZ’s statement. He continued:

The floor is also the place where a fair few analysts’ jaws – including our own – dropped after the assertion of the central bank that it sees none of the inflation pressures that many in the market claimed beforehand as evidence in support of at least a nod in the direction of a 2018 tightening bias.