RBNZ relying on currency depreciation to support the economy

New Zealand central bank (RBNZ) left its key rate unchanged as expected at yesterday's policy meet. The central bank seemed notably more concerned about developments in China, on the global financial markets and above all on the commodity markets. 

That is hardly surprising as the economic downturn in China, its main trading partner, and the weakness in the commodity sector, New Zealand's most important export sector, play a more important role for the RBNZ. And that is the reason why it is relying on its currency's weakness to support the economy. The slide in NZD-USD last night is likely to have been only a first taste. 

"We expect to see further notable NZD depreciation over the coming quarters. If the exchange rate should stop falling on its own accord the RBNZ is likely to help it on its way again - it made that very clear yesterday," says Commerzbank in a research note to clients.