Online shopping a-go as dollar rises


This weekend could be a good time for some internet shopping on a British website.

The New Zealand dollar has risen strongly against the Pound after the Bank of England cut British interest rates for the first time since 2009.

The Kiwi had risen to 54.78 pence by 6am, up almost two percent from 53.77 pence at 5pm on Thursday afternoon.

The Bank of England cut its main lending rate to a record low 0.25 percent from 0.5 percent, and Governor Mark Carney vowed to take "whatever action is necessary" to achieve economic stability after Britain's vote to leave the European Union.

The rate cut was anticipated, but Mr Carney also announced additional measures.

The Bank of England will buy 10 billion pounds (NZ$18 billion) of high grade corporate bonds to support economic growth.

Another 100 billion pounds (NZ$182 billion) has been allocated to ensure that British banks keep lending.

New Zealanders do notice big moves in the currency.

Figures released this week by BNZ Marketview showed that online spending by New Zealanders at UK sites surged in the week immediately following the 'Brexit' referendum.

Spending soared 47 percent compared to the same week a year earlier, as people took advantage of a sharp rise in the value of the Kiwi against the Pound.

Online spending in terms of British pounds rather than New Zealand dollars, at UK sites, rose 78 percent.

Spending was widespread across retail categories, with clothing, cosmetics, computers and accessories, sport and camping equipment all strong.

The New Zealand dollar has also gained against the American dollar, rising 0.3 percent overnight to trade at 71.80 US cents at 6am.

The Kiwi slipped 0.3 percent against the Australian dollar, at 94.09 cents.

It was up almost half a percent at 64.50 Euro cents.

The Reserve Bank is widely expected to cut the Official Cash Rate next Thursday by 0.25 percent to a new low of 2 percent.

But some in the markets are wondering if the cut could be even deeper.

A 50 basis points (half a percent) cut would take the OCR to 1.75 percent. That would be only 0.25 percent higher than Australia's 1.5 percent cash rate.

However economists at ANZ say they do not expect the Reserve Bank will cut by half a percent on August 11th. That is because the only previous times the Reserve Bank has cut by that much has been in the wake of "emergency-type" events like the February 2011 earthquake in Christchurch and the Global Financial Crisis in 2008-2009.

Economists say that if the RBNZ does cut the OCR by 0.25 percent that does not mean that mortgage rates will fall by the same amount. That is because the banks have adjusted some rates in anticipation of an OCR cut and they are also facing higher funding costs to borrow money offshore.