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RBNZ hawkish repricing lifts the New Zealand dollar vs peers

After a rate hike last week, markets moved toward pricing a back to back increase at the RBNZ’s September meetings as policymakers flagged upside risks to inflation.

Reported · Written up by our desk · Central Banks

MUFG said the New Zealand dollar was the top G10 performer overnight, supported by a hawkish repricing of Reserve Bank of New Zealand rate expectations. The shift came after last week’s RBNZ hike and subsequent remarks that highlighted upside risks to the September inflation forecast.

FXStreet reported that RBNZ Chief Economist Paul Conway pointed to potential upside pressure to inflation tied to Middle East developments, while also warning of a response if those pressures persisted. In response, markets now anticipate a back to back rate increase in September.

The same update noted that after the RBNZ guidance, the Kiwi’s outperformance reflected broader currency moves as well, with FX activity also influenced by developments such as US CPI coming in below estimates in June. The report said this helped the US dollar lose momentum across the board.

FXStreet also referenced the broader policy backdrop, including prepared remarks from Fed Chairman Kevin Warsh indicating the Fed has no tolerance for persistently elevated inflation, as markets recalibrated interest rate expectations.

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