New Zealand Dollar Rises as RBNZ Leaves Rates on Hold As Expected

New Zealand Dollar, Reserve Bank of New Zealand Monetary Policy Decision, Talking Points:

  • RBNZ left the Official Cash Rate at 1%, a record low in place since August
  • Its accompanying statement was dovish, but not obviously more so than usual
  • NZD/USD made gains, clearly some had expected that dovish rhetoric would be stepped up

Find out what retail foreign exchange investors make of the New Zealand Dollar’s chances right now at the DailyFX Sentiment Page

The New Zealand Dollar made sharp gains Wednesday after the Reserve Bank of New Zealand left interest rates on hold, as had been widely expected.

The central bank shocked markets in August with a surprise, half-percentage-point hack at the Official Cash Rate which took it down to a new record low of 1%. Although the markets have always doubted that this would mark the end of the rate cutting cycle, they did suspect that the central bank would wait a while to assess its effects on economic activity and pricing power before considering another move.

This proved to be broadly the case. The Monetary Policy Committee agreed that new information since August didn’t warrant any change to the outlook. However, it did note that global trade and other political tensions remained elevated and said that there remains scope for more fiscal and monetary stimulus if necessary. Rates can be expected to remain lower for longer, the Committee said.

It also noted the easing of the New Zealand Dollar exchange rate, with implicit approval.

All up, this statement was not obviously more dovish than those of the recent past, which probably accounts for NZD/USD’s gains in the aftermath.

New Zealand Dollar Vs US Dollar, 5-Minute Chart.

The New Zealand Dollar has fallen this month to lows not seen since September 2015 and, for as long as it clearly lacks any prospect of interest rate support, it seems unlikely to stage a meaningful recovery.

New Zealand Dollar Vs US Dollar, Monthly Chart

Like its Australian cousin the New Zealand Dollar still offers interest rates below those of the US Dollar, a fact which is likely to keep both under pressure for as long as it lasts.

New Zealand Dollar Resources for Traders

Whether you’re new to trading or an old hand DailyFX has plenty of resources to help you. There’s our trading sentiment indicator which shows you live how IG clients are positioned right now. We also hold educational and analytical webinars and offer trading guides, with one specifically aimed at those new to foreign exchange markets. There’s also a Bitcoin guide. Be sure to make the most of them all. They were written by our seasoned trading experts and they’re all free.

— Written by David Cottle, DailyFX Research

Follow David on Twitter@DavidCottleFX or use the Comments section below to get in touch!