RBNZ Surprises Investors by Projecting Rate Hike by September 2022

The major Asia-Pacific currencies are trading higher on Wednesday following somewhat hawkish comments from the Reserve Bank of New Zealand, which hinted at the possibility of an interest rate cut sooner than previously expected.

At 02:52 GMT, the NZD/USD is trading .7287, up 0.0059 or +0.82%. The AUD/USD is at .7779, up 0.0025 or +0.33% and the USD/JPY is trading 108.751, down 0.020 or -0.02%.

Reserve Bank of New Zealand Holds Rates, Points to Hike Next Year

The Reserve Bank of New Zealand (RBNZ) kept its official cash rate (OCR) unchanged in a widely expected decision on Wednesday, but projected a rate hike by September next year, sending the Kiwi soaring.

The RBNZ retained its large scale asset purchase (LSAP) program at NZ$100 billion ($72.18 billion). The Funding for Lending Program (FLP) operation was unchanged.

Economists in a Reuters poll had unanimously expected the RBNZ to hold rates.

In its OCR projections, the RBNZ penciled the cash rate to reach 0.5% in September next year and to 1.5% by the end of 2023.

Policymakers, however, tried to play down expectations by saying it would maintain its current stimulatory monetary settings until its inflation and employment targets are met.

The NZD/USD spiked to .7297 after the RBNZ statement, its highest level since May 10, when it hit a top at .7305.

Shortly before the RBNZ releases, the New Zealand Dollar was edging higher despite a drop in New Zealand’s headline trade balance from $1.7 Billion to $0.73 Billion in April. The internals suggest the imports fell below $4.98 Billion from $5.66 Billion whereas exports eased below $5.69 Billion to $5.37 Billion for the stated month.

Australian Dollar Recovers from Flat Opening as Construction Spending Rises

The Australian Dollar is trading higher on Tuesday as speculators piggy-backed the surge in the New Zealand Dollar, and showed a bullish response to better-than-expected construction spending news.

Gains were limited early in the session as traders expressed concern over the spike in new coronavirus cases in Melbourne and regional Victoria. The outbreak in Victoria has reached a count of 15.

In economic news, the value of total construction work done in Australia was up a seasonally adjusted 2.4 percent on quarter in the first three months of 2021, the Australian Bureau of Statistics said on Wednesday – coming in at A$51.975 billion. That beat expectations for an increase of 2.2 percent following the upwardly revised 0.4 percent increase in the three months prior (originally -0.9 percent). On a yearly basis, the value of total construction work fell 1.1 percent.

For a look at all of today’s economic events, check out our economic calendar.