NZ dollar skids as RBNZ flags gradual hikes, Aussie supported
SYDNEY: The New Zealand dollar slid on Wednesday after the country’s central bank raised interest rates as expected but projected a more gradual and limited pace of further tightening than markets had wagered on. In contrast, the Australian dollar held steady after data showed the economy held up better than expected in the second quarter, narrowing the odds on another hike in rates there. At the…
The New Zealand dollar experienced a significant drop on Wednesday following the Reserve Bank of New Zealand's decision to raise interest rates as expected, but with a more gradual and limited approach to further tightening than markets had anticipated. In contrast, the Australian dollar remained relatively stable after economic data revealed that the country's economy performed better than expected during the second quarter, reducing the likelihood of additional rate hikes.
Both countries' bond yields were impacted by a global selloff triggered by increased fighting in the Gulf, which caused oil prices to rise and heightened concerns about inflation.
The Reserve Bank of New Zealand increased its official cash rate by 25 basis points to 2.75%, signaling that further tightening would likely occur, albeit at a slower pace. It projected the cash rate to reach 2.81% by December and 3.15% by the end of 2027, only slightly higher than the previous forecast in May. Market participants had anticipated a faster pace of rate hikes, with some even predicting a top rate of 3.5%.
According to Westpac's New Zealand strategist Imre Speizer, the market's reaction indicated a slightly dovish shift, with the bank's arithmetic suggesting no hike in October but a potential hike in December.
As a result of these developments, the kiwi dollar experienced a decline of 0.7%, reaching $0.5893, down from a 0.4% decrease overnight. Support for the kiwi dollar is currently seen at $0.5821, with resistance at $0.5988. The Australian dollar, on the other hand, held steady at $0.7143, following a 0.3% decrease the previous day.
The currency's support levels are around $0.7135 and $0.7067, with resistance at the recent 15-week high of $0.7208. Financial markets responded to the stronger-than-expected Australian economic data by increasing the probability of an interest rate hike this month to 58%, up from 49% before the release. They also priced in a potential move to a 4.60% rate by November, with 10-year yields climbing to their highest levels since mid-2011 at 5.161%.
Written by urgent.news from Business Recorder's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
