Fundamental Comment

New Zealand dollar jumps as RBNZ cuts rate cut chances

New Zealand dollar jumps as RBNZ cuts rate cut chances

The New Zealand dollar jumped against its U.S. counterpart on Wednesday after the Reserve Bank of New Zealand left interest rates unchanged and cited confidence about economic outlook.

The NZDUSD pair soared to a high of 0.6476 from the session's open at 0.6401, resuming its rebound for a second straight session after hitting a bottom of 0.6378, the lowest since mid-November last year.

As predicted, the RBNZ left interest rates at 1 percent, while removed the previous sentence of that it would "add further monetary stimulus if needed" from the statement.

While the bank stressed on the risks from the coronavirus on the New Zealand economy, the central bank said the impact would be limited and for a short time.

The RBNZ also raised the interest rate trajectory to 1 percent from 0.9 percent. This means that the there is no chance the central bank would cut interest rates this year, especially as it expected growth to accelerate in the second half this year.

The statement provided upbeat comments about employment and inflation, as the statement said employment is “at or slightly above its maximum sustainable level”. Meanwhile, inflation is “close to the 2% mid-point” of the target range.

Now, the next move for interest rate should be a hike, which could come in late 2021 the earliest.

The dollar index traded slightly higher at 98.66, ahead of Fed Chair Jerome Powell's testimony on the Semiannual Monetary Policy Report before the Senate Banking Committee in Washington DC.

Share Artical