* RBNZ slashes rates 50 bps, kiwi skids 2%, Aussie 1%
* Yen gains as stunned investors seek safety
* Yuan falls again amid U.S.-China trade conflict
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
By Tommy Wilkes
LONDON, Aug 7 (Reuters) - The New Zealand dollar fell 2% on
Wednesday after its central bank stunned markets with an
aggressive interest rate cut and said negative rates were
possible, pushing the Australian dollar lower and triggering a
rush into the safety of the Japanese yen.
By 0700 GMT, the Kiwi was on course for its biggest one-day
tumble in two years as the currency plunged back to its lowest
level since early 2016.
While central banks globally have turned increasingly dovish
in recent months as they try to revive growth and fight low
inflation rates, the extent of the Reserve Bank of New Zealand's
(RBNZ) move caught markets off guard.
The RBNZ slashed rates by 50 basis points against an
expected 25 basis points to 1%, and Governor Adrian Orr said
negative rates were possible. "In our view, today's decision and Governor Orr's conference
pave the way for further easing and we expect another 25 bp cut
in November now, with risks of more easing beyond that,"
Barclays economists said in a note.
The kiwi was last down 2% at $0.6397 NZD=D3 , having
earlier hit $0.6378.
The Aussie fell 0.7% to $0.6711 AUD=D3 as markets ramped
up their bets that Australia would also cut rates faster and
deeper than previously expected. Earlier, the Australian dollar
dropped 1.1% to $0.6677, a level not seen since early 2009.
Analysts said such large moves into two of the traditionally
higher-yielding major currencies had jolted forex markets, and
encouraged a move into the perceived safety of the yen.
The Japanese currency rose 0.2% to 106.27 JPY=EBS ,
although that was still some way from levels seen on Monday when
the escalating U.S.-China trade war panicked investors.
Against the yen, the kiwi dropped 2.3% NZDJPY= , at one
point falling to the lowest since late 2012, while the Aussie
AUDJPY= hit 70.74 yen, the lowest since April 2009.
YUAN WEAKENS AGAIN
The Chinese yuan fell again, dropping 0.4% to 7.077
CNH=EBS in offshore markets, although it was above Monday's
lows when Beijing shocked markets by allowing the currency to
fall through the key level of 7 yuan per dollar.
Concerns are growing because the world's two largest
economies are locked in a bitter trade dispute that rapidly
escalated last week when U.S. President Donald Trump said he
would impose more tariffs on Chinese goods.
China responded on Monday by allowing its currency to weaken
past the psychologically important line of 7 per dollar, which
immediately prompted Washington to label Beijing a currency
manipulator. "We were already on edge about all the U.S. tariffs against
China, but now people are starting to question whether we're
headed toward some global recession," said Kiyoshi Ishigane,
chief fund manager at Mitsubishi UFJ Kokusai Asset Management.
The euro was unchanged against the dollar at $1.1196
EUR=EBS , while against a basket of currencies the greenback
was little moved .DXY .
Sterling weakened 0.2% to $1.2154 GBP=D3 .