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NZ dollar holds near lows as RBNZ hike odds near 80%

NZD/USD hit about 0.5650 Monday, with markets pricing an OCR rise to 3.0% on Oct. 28 from 2.75%.

Reported · Written up by our desk · Central Banks

Five straight weekly declines have pushed NZD/USD to its weakest level since late June, with Monday’s low near 0.5650 matching the prior two sessions before the pair closed just above that level on a small gain, according to FXStreet.

FXStreet reports that market pricing now shows about an 80% chance the Reserve Bank of New Zealand will lift its Official Cash Rate to 3.0% from 2.75% on October 28, up from roughly a one in three chance immediately after the September 2 hike.

The buildup in rate expectations follows comments from RBNZ Governor Breman on September 22, who linked higher crude oil prices to near term inflation rising above what the central bank assumed in September, and after September 17 data showed a second quarter GDP beat along with revisions that lifted earlier quarters.

FXStreet also notes timing factors around the decision, including New Zealand’s third quarter CPI release on October 21 and the general election on November 7, while cautioning that a Kiwi gain could be limited if the Fed moves in the same day.

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