The New Zealand dollar surged to a three-week high on Wednesday after the Reserve Bank of New Zealand (RBNZ) kept rates unchanged and reiterated the need for restrictive policy for an extended period. The kiwi hit $0.6077 before facing selling pressure, settling at $0.6069 amid resistance at the 200-day moving average of $0.6067.
Market reactions were subdued overall, with two-year swap rates at 4.905%. Investors predict the first rate cut in August with a 92% conviction, expecting a total easing of 60 basis points this year. Chief economist Jarrod Kerr of Kiwibank believes the first rate cut might occur in November, dismissing calls for August cuts as premature.
The New Zealand dollar strengthened against its Australian counterpart, bouncing back from a 10-month low, while the Aussie dipped to NZ$1.090. The Australian dollar held firm against the U.S. dollar at $0.6625, eyeing resistance at $0.6667 pending the U.S. consumer inflation report. Amidst the carry trade, the Aussie remained near nine-year highs at 100.57 yen.
The RBNZ’s decision and outlook for future policy have influenced the currency markets, with investors closely monitoring upcoming economic data and central bank actions in both New Zealand and Australia.
