Weak Kiwi doing great to shield economy from falling commodity prices

Reserve Bank of New Zealand (RBNZ) is doing excellent job by showing aggressiveness in reducing rates. Since April it has reduced policy rates thrice consecutively reducing overnight cash rate (OCR) to 2.75% from 3.5%.

This aggressiveness is making up for the delay in response by the bank, which prematurely raised rates last year by 50 basis point, only to see both economy and inflation plunge.

Kiwi has registered sharp drop, over this assertive tone of action from RBNZ and is the worst performing developed currency this year so far. Kiwi is down more than 17% this year so far against Dollar. New Zealand Dollar is currently trading at 0.641 against Dollar, down from 0.884 back in July 2014.

This weak Kiwi this year has working in favor of New Zealand's economy, shielding the exporters well from global commodities price slide.

Latest report from ANZ shows that, while commodity price are down -18.2% annually in September, in Kiwi terms they are up by 2.7%.

Moreover, lower prices are likely to give rise to demand which is sure to benefit New Zealand economy going ahead.