Kiwi– it's getting more interesting

Note: This section contains information in English only.
Source: Dukascopy Bank SA
"The speed and extent to which the OCR will be raised will depend on economic data and our continuing assessment of emerging inflationary pressures, including the extent to which the high exchange rate leads to lower inflationary pressures"
-RBNZ


The New Zealand Dollar performed another rally this week, with NZD/USD soaring to 0.8636, and hitting the highest since April 17. The kiwi advanced versus all 16 major peers following April's RBNZ meeting, and taking into account hawkish comments and another bold action the currency is expected to continue appreciating.

As it was widely expected the Reserve Bank of New Zealand increase its official cash rate for the second straight month, as economic recovery accelerates, while saying the high exchange rate is offsetting the inflation growth along with other economic indicators. The RBNZ hiked the OCR by 25 basis points to 3% after a similar move was made a month earlier. Strong kiwi has led to low import-price inflation and has been providing support for tradables inflation, while also creating headwinds for the nation's exporters. The inflation rate picked up 0.3% in the first quarter, pulling inflation down to 1.5%, slightly below the mid-point of the RBNZ target band.

At the time being, the central bank raised its growth outlook for this year, saying the economy will expand 3.4% in 2014 and slow to 3% next year. It is clear now that the central bank will continue tightening its monetary policy, and according to analysts from the ASB, the next hike will be made during June's meeting. The kiwi weighted index stood at 80.1 on Thursday and the outlook is strongly bullish.
© Dukascopy Bank SA

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