March 27, 2019 / 8:51 AM / 8 months ago

FOREX-New Zealand dollar slides as central bank signals possible rate cut

* RBNZ sends Kiwi 1.6 pct lower; Aussie also falls

* Euro little moved by Draghi comments

* Sterling prepares for more Brexit votes in UK parliament

* Graphic: World FX rates in 2019

By Tommy Wilkes

LONDON, March 27 (Reuters) - The New Zealand dollar dropped 1.6 percent on Wednesday after the central bank flagged a possible cut in interest rates, becoming the latest set of policymakers to turn dovish.

The signal also weighed on the Australian dollar, which dropped half a percent.

“The market was taken by surprise by the dovish tone (of the Reserve Bank of New Zealand),” Thu Lan Nguyen, an analyst at Commerzbank said. “Most central banks have turned dovish. Even those that hiked interest rates did it with a very cautious outlook on rates.”

The U.S. Federal Reserve abruptly ended three years of monetary policy tightening last week amid signs of an economic slowdown. The European Central Bank, Reserve Bank of Australia and the Bank of Japan have all turned dovish this year, while China’s central bank began loosening policy in 2018.

The kiwi fell 1.6 percent to below $0.68 after the RBNZ left rates unchanged and said its next move would probably be lower.

The Australian dollar weakened half a percent to $0.71 .

Currency markets were quiet elsewhere. The U.S. dollar recovered as Treasury yields came off recent lows. Against a basket of currencies, the dollar index was up 0.1 percent to 96.832.

The euro was little changed at $1.1267. European Central Bank President Mario Draghi said on Wednesday that policymakers could delay a planned interest rate hike again if necessary, but dovishness has already been priced into the single currency, analysts said.

“Bids for the dollar are returning with Treasury yields off their lows, and also because negative views towards the European economy have done no favours for their currency,” said Shin Kadota, senior strategist at Barclays in Tokyo.

The pound edged down 0.15 percent to $1.3185, retracing its earlier gains in the face of the stronger dollar.

Britain’s parliament has taken control of the Brexit process from Prime Minister Theresa May for a day, and lawmakers will on Wednesday vote on different Brexit options, looking for a way to break its deadlock over how to leave the European Union. GBP/

The Japanese yen was little changed against the dollar, trading at 110.59 yen. (Additional reporting by Shinichi Saoshiro in Tokyo, editing by Larry King)

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