RBNZ Keeps Rates the Same, But Comments Dovish?

DailyFX

THE TAKEAWAY: RBNZ maintained official cash rate at 2.5% > The Kiwi fell sharply following the rate decision and “dovish” comments from RBNZ governor Wheeler > Kiwi Outlook Bearish

As expected by most analysts, the Reserve Bank of New Zealand (RBNZ) chose to maintain an official cash rate (central bank rate) of 2.50%. The Kiwi, which has been appreciating steadily over the last 6-months fell sharply following the RBNZ’s release, with the NZD/USD trading at 0.81680 as of this report.

Prior to the RBNZ rate release, the central bank’s monetary stance appeared cautious, but potentially leaning towards a rate hike given the rise in New Zealand home prices and the currency’s key status as a high interest rate provider. Comments made by RBNZ Governor Graeme Wheeler, following the rate cut, however, seem to point towards a more dovish tone. This change in monetary outlook appears due to the Kiwi’s rapid appreciation and lowered GDP expectations because of a national drought. This dovish stance may be furthered should New Zealand economic data weaken moving forward. As a result forex traders should be sure to keep their eye out for the NZ GDP data release set for March 20th.

Aside from future RBNZ rate decisions, FXCM traders should remember the key factor of risk sentiment, which will determine the Kiwi’s movement to a great extent. As long as the market remains risk-on, demand for the Kiwi should remain, due to its high interest yield.

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NZD/USD (6 hr. chart)

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Created by Jason Shemtob using Marketscope 2.0

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