In a move that was widely anticipated, the RBNZ raised the benchmark interest rate from 3% to 3.25%, making it the third rate hike in the past three meetings.
NZD/USD extends its recent gains and climbs around 80 pips to 0.8620. This big leap comes despite not that hawkish comments from the central bank.
More: EUR/NZD crashes to a one year low – euro carry trade already in play?
It seems that the move was not 100% priced in, probably due to the recent worries about milk prices. The Reserve Bank of New Zealand does not like a strong kiwi, but in a world hungry for yield, this is the result of a rate hike.
Indeed, the central bank in the small nation says that the level of NZD remains unsustainable. In addition, the growth forecast for the 12 months ending in March 2015 was actually lowered from 2.7% to 3.2%. They even say that inflation is to remain moderate.
Nevertheless, the kiwi shines. A hawkish comment from the RBNZ refers to current inflation: RBNZ governor Graeme Wheeler says that inflation pressures remain high.
In comparison to other developed nations, New Zealand has a very high interest rate.
Here is how it looks on the chart:
The total swing of the pair is around 110 pips: from 0.8516 to 0.8627. While the pair has stabilized, more moves higher cannot be ruled out.
The next level of resistance is 0.8640. For more levels, events and analysis, see the NZDUSD forecast.
