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New Zealand dollar rises to three-week high after RBNZ hike

NZD/USD jumped about 1.0% to roughly 0.5761 after the RBNZ lifted the Official Cash Rate by 25 bps to 2.50%.

Reported · Written up by our desk · Major Pairs

The New Zealand dollar strengthened on Thursday, with NZD/USD rising about 1.0% to around 0.5761, its highest level since June 19, according to FXStreet. The move extended gains for a second day as the Reserve Bank of New Zealand delivered a hawkish rate decision.

FXStreet said the RBNZ increased the Official Cash Rate by 25 basis points to 2.50%. In its policy statement, the central bank noted inflation is still above target and that, with economic activity expected to strengthen, further reductions in monetary stimulus are likely needed to bring inflation back to the 2% target mid-point.

Brown Brothers Harriman told FXStreet the RBNZ has room to normalize the OCR toward more neutral levels, citing an estimated neutral range of 2.2% to 4.1%. The swaps curve referenced by FXStreet implies nearly 100 basis points of tightening over the next 12 months, which it said is nearly twice the RBNZ policy path projection published in May.

FXStreet also linked the NZD strength to a relatively softer US dollar, while noting risk sentiment deteriorated after renewed fighting between the United States and Iran. It cited the US Dollar Index trading near 100.85, down 0.20% on the day, and quoted New York Fed President John Williams saying inflation is still far too high and that the Fed is debating scenarios while staying committed to the 2% goal.

Latest closeDollar index 101.39 ▼0.1%

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