The New Zealand dollar started the current trading session soft following the monetary policy meeting of the Reserve Bank of New Zealand at the end of the previous session. But the currency managed to trim losses against some rivals by now and erase them outright against others.
The RBNZ left its main interest rate at 1.75% as was widely expected. Yet the markets considered the central bank’s policy statement to be rather dovish as it concluded saying:
Monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly.
As for the exchange rate, Reserve Bank Governor Grant Spencer said:
The exchange rate has firmed since the November Statement, due in large part to a weak US dollar. We assume the trade weighted exchange rate will ease over the projection period.
Separately, Assistant Governor John McDermott voiced concern about sluggish inflation and what it might entail for monetary policy:
There is a significant probability that the next rate move could be an increase sometime in the future, and thereâs also a substantial probability that the next move could actually be a cut. If we saw big moves in inflation expectations, the market should expect the bank to act.
While economists do not expect the RBNZ to actually cut interest rates, a hike looks seems likely now.
NZD/USD traded at 0.7222 as of 11:12 GMT today after opening at 0.7234 and falling to the session low of 0.7175. NZD/JPY opened at 79.05, dropped to the low of 78.56, but bounced to 79.17 later. EUR/NZD was near its opening level of 1.6934 after rallying to the session high of 1.7088 earlier.
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