Central banks in the US and UK reduced official interest rates again, though the US Federal Reserve (Fed) indicated it would now take a 'wait and see approach' before deciding whether any more rate reductions are necessary.
Share markets rallied as investor uncertainty diminished with the MSCI World Gross Index (in local currencies) up 6.2% in April, with some of the biggest gains made in the Japanese and European markets.
The Reserve Bank of New Zealand (RBNZ) left the Official Cash Rate (OCR) on hold at 8.25%, but signifi cantly, it toned down its view that any rate cuts would be some time away.
The New Zealand share market rallied 4.4% (NZX 50 Index) in response to overseas trends, though tight monetary policy and a slowing economy dampened the performance.
10-year government bond yields rose across major markets as the prospect of the Fed reducing its cash rate further diminished. The New Zealand fixed interest market performed relatively well because domestic interest rates are already high and there is increasing expectation that the OCR will fall later in 2008.
The Australian dollar (AUD) was strong during April because of rising commodity prices and high interest rates compared with those in the US, Japan and Europe. The New Zealand dollar (NZD) weakened slightly on a tradeweighted basis, down against the AUD, US Dollar (USD) and sterling, but up against euro and yen.
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