The New Zealand dollar was the weakest currency on the Forex market today, sinking after the monetary policy announcement from the Reserve Bank of New Zealand. While the central bank kept its benchmark Official Cash Rate (OCR) unchanged, it almost doubled the scale of the quantitative easing program.
The RBNZ left its key interest rate unchanged at 0.25% — a move that was widely expected by markets. At the same time, the bank increased the size of the Large Scale Asset Purchase program to NZ$60 billion from the previous limit of NZ$33 billion. As for the future monetary policy decision, New Zealand policymakers signaled that an interest rate cut remains in the cards:
The Monetary Policy Committee is prepared to use additional monetary policy tools if and when needed, including reducing the OCR further, adding other types of assets to the LSAP programme, and providing fixed term loans to banks.
In fact, the RBNZ clearly talked about the possibility of negative rates:
The Committee noted that a negative Official Cash Rate (OCR) will become an option in future, although at present financial institutions are not yet operationally ready.
Markets reacted to the statement by sending the New Zealand currency plunging down.
There will not be many important reports in New Zealand for the rest of the week, though tomorrow’s New Zealand annual budget release can have a tremendous impact on the kiwi.
NZD/USD fell from 0.6075 to 0.6040 as of 11:39 GMT today, touching the low of 0.6000 intraday. NZD/CHF fell from 0.5889 to 0.5846, and its daily low was at 0.5818. NZD/CAD sank from 0.8553 to 0.8466.
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