SYDNEY: The New Zealand dollar retreated on Wednesday after the central bank said it could slash cash rates to below zero and engage in asset buying programmes in case of a major crisis, with the Australian currency falling in sympathy.

There is no imminent prospect of using such measures, Reserve Bank of New Zealand (RBNZ) Assistant Governor John McDermott told Bloomberg, but added “the probability of needing them at this point in the cycle is higher than it ever was in history.”

The kiwi dollar fell more than three quarters of a US cent to a session low of $0.6894, from a one-week top of $0.6974 touched on Tuesday.

Across the Tasman Sea, the Australian dollar failed at critical chart resistance of around $0.76 touched on Tuesday to hit a session low of $0.7535.

The antipodean currencies also got a setback after US President Donald Trump tempered optimism over progress made so far in easing tariff tensions with China. Trump said on Tuesday he was not pleased with recent trade talks between the two countries.

New Zealand government bonds rose, sending yields about 2 basis points lower.

Australian government bond futures gained, with the three-year bond contract up 1.5 ticks at 97.770. The 10-year contract rose 2 ticks to 97.145.

The RBNZ last cut rates to a record low 1.75 percent in late 2016 and has repeatedly indicated the need for policy to remain stimulatory as inflation remains tepid.

In its research paper, the RBNZ said while there was further room to ease policy if needed, the bank was not currently projecting a “significant decrease” in the cash rate.

Further weighing on risk assets, Trump said there was a “substantial chance” his summit with North Korean leader Kim Jong Un will not take place as planned on June 12 amid concerns Kim is resisting giving up his nuclear weapons.—Reuters