Reserve Bank of New Zealand keeps interest rate on hold

At 8pm last night the RBNZ voted to keep interest rates on hold at their historic lows of 1.75%. This was widely anticipated, and the meat of the even can therefore be found in the accompanying rate statement. The key phrase drawn from the document is Governor Wheeler stating that the central bank’s policy would continue to remain ‘accommodative’. A term which when fleshed out effectively means that if the situation deteriorates they will step in. He himself said this will be for a ‘considerable period’.

Such dovish tones again were enough to raise the Pound’s status against the New Zealand Dollar, recovering the losses put in place following the day’s events yesterday.

Citing continued issues with inflation, which the bank has failed to hit its 2% target for since Wheeler took office in 2012. Frankly he even mentioned that a cheaper currency may be better for balanced growth, stating the drop in its value this month needs to continue.

What else will impact NZD exchange rates?

The New Zealand Dollar seems in a position to lose much of its value in the next few months.

Firstly, one of its main drawing points, its higher interest rate returns compared to other currencies, is coming under fire. As the above states Wheeler isn’t taking any options off the table, so we may see the rate journey lower. But we are also seeing hints of interest rate rises in key economies like the UK, US and Europe. With investors set to be sorely tempted to go elsewhere, the New Zealand Dollar may deflate.

Furthermore, concerning movements down in commodity prices, a likely reaction to Trump’s trade policies, reducing US demand for foreign goods, harms commodity based currencies such as the New Zealand Dollar. Would you believe the currency has been hurt since the beginning of March because the price of milk has plummeted? There are a few unique results which can affect one or more currencies vastly more than others.

Based on the forecasts, we could be set for further improvements on buying New Zealand Dollar rates of exchange. The corollary being, that New Zealand Dollar holders may wish to take the sensible option and secure their transfer into your destination currency whilst these rates are so historically attractive.

For more information on how future economic or political events could impact New Zealand Dollar exchange rates, feel free to get in touch with myself at jjp@currencies.co.uk.

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