NZD Retreats After Rally

The New Zealand dollar slipped today after yesterday’s advance. The Reserve Bank of New Zealand kept monetary policy unchanged, but maintained its hawkish bias, signaling about possible interest rate hike next year.

The RBNZ left the Official Cash Rate (OCR) unchanged at 2.5 percent yesterday. The central bank hinted that a strong currency may lead to a delay of a rate hike:

Sustained strength in the exchange rate that leads to lower inflationary pressure would provide the Bank with greater flexibility as to the timing and magnitude of future increases in the OCR.

Still, higher borrowing costs remain likely:

Although we expect to keep the OCR unchanged in 2013, OCR increases will likely be required next year. The extent and timing of the rise in the policy rate will depend largely on the degree to which the momentum in the housing market and construction sector spills over into broader demand and inflation pressures.

The ANZ business confidence index dropped from 54.1 in September to 53.2 in October, hurting the kiwi.

NZD/USD traded at 0.8255 as of 1:41 GMT today following the earlier drop from 0.8261 to 0.8229. NZD/JPY slid from 81.38 to 81.20.

If you have any questions, comments or opinions regarding the New Zealand Dollar,
feel free to post them using the commentary form below.

Leave a Reply

Your email address will not be published. Required fields are marked *