New Zealand Dollar Falls as RBNZ Talks Down Rate Hike Outlook
Posted 07-29-2010 at 10:50 AM by DailyFX
The New Zealand Dollar fell after a widely expected interest rate hike from the Reserve Bank of New Zealand as the central bank’s Governor Alan Bollard spoke out directly against the currency’s recent appreciation and downplayed the extent of further tightening.
The RBNZ chief said that although “the level of the [interest rates] is still very supportive of economic activity” even after today’s increase, “pace and extent of further [rate hikes] is likely to be more moderate than was projected” as recently as June. Speaking specifically about the exchange rate, Bollard said, “The New Zealand dollar has appreciated in recent weeks. This appreciation is inconsistent with the softening in New Zealand’s economic outlook and moderation in our export commodity prices.” Commenting on the outlook for prices, Bollard noted that “government-related price changes are likely to temporarily push annual CPI inflation above 3 percent.” adding the RBNZ does not expect this to have a lasting impact on underlying price growth, thereby deflating any bets on accelerated rate hikes as the data crosses the wires in the months ahead.
The Kiwi fell tracked lower against all of its major counterparts, down nearly 1 percent against the spectrum of major currencies. Interestingly, the currency proved most resilient against its Aussie counterpart, down by a relatively small 0.6 percent after yesterday’s disappointing Australian CPI data dashes hopes for further tightening in the largest antipodean country. Today’s rate hike was widely expected, with a Credit Suisse gauge of priced-in expectations showing traders saw a 98 percent chance of an increase ahead of the announcement.
The RBNZ chief said that although “the level of the [interest rates] is still very supportive of economic activity” even after today’s increase, “pace and extent of further [rate hikes] is likely to be more moderate than was projected” as recently as June. Speaking specifically about the exchange rate, Bollard said, “The New Zealand dollar has appreciated in recent weeks. This appreciation is inconsistent with the softening in New Zealand’s economic outlook and moderation in our export commodity prices.” Commenting on the outlook for prices, Bollard noted that “government-related price changes are likely to temporarily push annual CPI inflation above 3 percent.” adding the RBNZ does not expect this to have a lasting impact on underlying price growth, thereby deflating any bets on accelerated rate hikes as the data crosses the wires in the months ahead.
The Kiwi fell tracked lower against all of its major counterparts, down nearly 1 percent against the spectrum of major currencies. Interestingly, the currency proved most resilient against its Aussie counterpart, down by a relatively small 0.6 percent after yesterday’s disappointing Australian CPI data dashes hopes for further tightening in the largest antipodean country. Today’s rate hike was widely expected, with a Credit Suisse gauge of priced-in expectations showing traders saw a 98 percent chance of an increase ahead of the announcement.
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