By Swati Pandey
SYDNEY, Feb 8 (Reuters) - The New Zealand dollar skidded to a one-month trough on Thursday after the country's central bank left interest rates at record lows and cut its inflation forecasts, suggesting easy monetary policy was here to stay.
The local dollar extended losses to drop as low as $0.7209, a level not seen since early January after the Reserve Bank of New Zealand (RBNZ) projected inflation will not reach 2.0 percent until the third quarter of 2020. The downgrade came as consumer price inflation for the December quarter undershot all expectations at just 1.6 percent when the RBNZ had hoped it would be nearer 2 percent, the middle of its 1-3 percent target band.
The kiwi was last at $0.7236. It is set for its second straight weekly fall after a solid rally in the past two months.
"On our initial read of the document we perceive a little more dovishness at the RBNZ," said Westpac economist Dominick Stephens. "The overall tone of the press release sounded resigned to ongoing low inflation."
Across the Tasman Sea, the Reserve Bank of Australia (RBA) too left rates at record lows earlier this week and signalled a steady policy path going forward as inflation remained tepid. The promise of loose monetary policy in the two countries contrasts with some of their rich world peers who have either already begun tightening or are expected to do so.
The Australian dollar was down 1 percent at $0.7820, a level not seen since early January.
The antipodean currencies were sold off overnight as a spike in U.S. Treasury yields sent the greenback higher and commodities took a knock with oil, copper and gold all down.
The Aussie has fallen in 8 out of the last 10 sessions as a rout in global markets took the sheen off the once high-flying currency. The Aussie is often sold during times of stress because Australia has an open economy that is leveraged to commodity prices and global growth and runs a perennial current account deficit.
It fell the most against perceived safe haven yen to edge closer to a recent two-month trough. It was last down 1.3 percent at 85.49 yen.
New Zealand government bonds eased with yields up 1.5 basis points at the long-end of the curve.
Australian government bond futures slipped down, with the three-year bond contract down 2 ticks at 97.830. The 10-year contract fell 2.5 ticks to 97.1350.
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