The interest rate in New Zealand remained unchanged at 2.5%. In the official RBNZ rate statement, the first paragraph talks about recovery while the last paragraph hints of future rate cuts. The kiwi went down just before the statement only to go up. A similar knee-jerk reaction was seen with Non-Farm Payrolls. Such events are only for brave traders.
Alan Bollard didn’t surprise with the decision to leave the rates unchanged. Here’s the negative sentence from the statement:
As a result, we continue to expect to keep the OCR at or below the current level through until the latter part of 2010.
But the beginning is much better:
Reserve Bank Governor Alan Bollard said: “There is more evidence that the decline in economic activity is coming to an end, and that a patchy recovery is underway.
Read the full statement here.
Confused? So is the kiwi.
NZD/USD fell from 0.6963 to 0.6930 in the minutes before the announcement. After the announcement it shot back up. To exactly the same place.
This knee-jerk behavior, or V-shaped graph occurred in the recent Non-Farm Payrolls release in the US. Kathy Lien elaborates about it here.
Earlier today, the kiwi flirted with the magical and a round number of 0.70. During the second wave of dollar weakness, NZD/USD managed to reach 0.7007 before returning to around 0.6960 towards the rate decision – levels in which it traded yesterday, after the first wave of dollar breakouts.
NZD/USD was the second currency pair to make a breakout, right after AUD/USD was the pioneer on Friday.
NZD/USD is a relatively easy pair to trade. Though it isn’t my favorite, it still ranks high on my list of most predictable currencies. New Zealand is at the end of the world, and also the kiwi doesn’t usually enjoy the limelight.
