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NZ Dollar Higher After RBNZ Cuts Interest Rates

December 10, 2015 at 20:24 by Vladimir Vyun

Rolled bills on the plain banknotesThe New Zealand dollar gained after the Reserve Bank of New Zealand cut interest rates during its policy meeting at the end of yesterday’s trading session.

The RBNZ reduced its key interest rate by 25 basis points to 2.5 percent, matching market expectations. The policy statement was not entirely positive for the NZ dollar as Governor Graeme Wheeler complained about the strength of the currency:

The New Zealand dollar has risen since August, partly reversing the depreciation that occurred from April. The rise in the exchange rate is unhelpful and further depreciation would be appropriate in order to support sustainable growth.

Yet overall, the report had positive impact on the kiwi as Wheeler signaled that he does not expect that another rate cut would be necessary:

Monetary policy needs to be accommodative to help ensure that future average inflation settles near the middle of the target range. We expect to achieve this at current interest rate settings, although the Bank will reduce rates if circumstances warrant.

It looks like the pessimistic forecasts were wrong, though the New Zealand currency has yet to erase its earlier losses during the current trading week.

NZD/USD gained from 0.6718 to 0.6748 as of 20:23 GMT today, reaching the high of 0.6781 intraday. NZD/JPY advanced from 81.57 to 82.06. EUR/NZD was down 1.2 percent from 1.6393 to 1.6207.

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

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