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Wednesday, October 8

NZ dollar struggles on risk aversion

The New Zealand dollar remained under pressure on Wednesday as global economic uncertainty weighed down on equity markets and eroded risk appetite, but it held above two-year lows.

The kiwi, which rallied late on Tuesday after the Reserve Bank of Australia's surprise 1 percent interest rate cut, stumbled as analysts predicted the move could also herald more aggressive easing from New Zealand's central bank.

The Reserve Bank of NZ's next policy meeting is on Oct. 23, with its 7.5 percent benchmark rate seen certain to fall.

"We see it as a tight call between 75 basis points and 100 basis points," ASB Bank chief economist Nick Tuffley said in a note to clients.

In normal times, the prospect of lower yields would hurt the kiwi, though given the global market turmoil investors might look more favourably on a big rate cut to shore up an economy already in recession.

At 0415 GMT the kiwi was at $0.6242/52 compared with $0.6383/93 in late local trade on Tuesday. It touched a two-year low of $0.6170 in late local trade on Monday.

On the cross rates, the kiwi was steady above a five-and-a-half year low against the yen and fell away from ten-month highs against the Aussie.

New Zealand's main opposition National Party unveiled its proposals for cutting personal taxes if it wins the Nov. 8 general election, promising larger cuts sooner than the Labour-led government.

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