The Reserve Bank of New Zealand cut the interest rate from 2.75% to 2.50% as widely expected. It also signaled that no cuts are planned in the near future and did not seem to complain too much about the exchange rate.
NZD/USD rattled and rolled, and eventually advances, escaping the fate of other commodity currencies.
The statement released by the RBNZ says that it expects interest rates to remain steady. The current level is also the level seen last year, before they began raising rates all the way to 3.50%.
So, keeping the rate at 2.50%, at its support line, is certainly significant.
Of course, they don’t rule out anything and do say that further cuts could be seen, but this doesn’t seem to apply to the near future, and that’s a positive.
Regarding the exchange rate, the team led by Wheeler concludes that it is unhelpful. We have already heard different tunes such as “unjustified†as well as a commitment to intervene. And indeed, we know about past interventions.
In his accompanying press conference, RBNZ Governor Graeme Wheeler talks about risks from falling dairy prices.
Earlier in the day, the kiwi was pressured on the “risk off†mood. However, it is important to remember that New Zealand’s soft commodities exports differ from Canada’s oil and Australia’s industrial metals.
Here is how the pair reacted and its behavior in the recent past:
