The New Zealand dollar retreated today after yesterday’s surge caused by the central bank’s monetary policy announcement. But by now, the currency has trimmed its losses and trades not that far from the opening level. The market sentiment put pressure on the currency as traders continued to be worried about the spreading Wuhan coronavirus.
The Reserve Bank of New Zealand left its benchmark interest rate unchanged at 1% yesterday. While such a decision was widely expected by markets, the tone of the statement accompanying the policy announcement was more hawkish than market participants anticipated. The central bank said:
Employment is at or slightly above its maximum sustainable level while consumer price inflation is close to the 2 percent mid-point of our target range.
That is compared with the previous statements, where employment was said to be “around” the maximum sustainable level and inflation was “below” the target range.
RBNZ Assistant Governor Christian Hawkesby said in an interview with Bloomberg today that the central bank has a “genuine neutral bias” on interest rates and “a genuine openness about where things go from here”. He stated:
We can stay on hold, keep rates low for a long time.
Going forward, there are no more notable economic releases for New Zealand scheduled for this week and very few for the next week. Therefore, the New Zealand currency will be reacting mostly to outside news, especially those about the virus outbreak in China.
NZD/USD was down from 0.6463 to 0.6429 intraday but has rebounded to 0.6456 by 9:45 GMT today. EUR/NZD traded at 1.6855 after opening at 1.6803 and rising to the daily high of 1.6904. NZD/JPY was at about 70.87 following the earlier drop from the open of 71.10 to the session minimum of 70.64.
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