RBNZ interest rate meeting is next major event for Kiwi traders
- The Reserve Bank of New Zealand is set to hold Official Cash Rate steady at 5.50% in November.
- RBNZ Governor Orr’s press conference and updated macro forecasts could cause volatility.
- The New Zealand Dollar is more likely to be impacted by Orr’s words than the RBNZ decision.
The Reserve Bank of New Zealand (RBNZ) is set to leave the Official Cash Rate (OCR) unchanged at 5.50%, following its monetary policy meeting on Wednesday. New Zealand’s central bank will likely keep the interest rate on hold for the fifth straight meeting while retaining its hawkish bias.
The New Zealand Dollar (NZD) is subject to extreme volatility should the RBNZ offer any surprises in the language of its Monetary Policy Statement.
What to expect from the RBNZ interest rate decision?
With a steady interest rate decision by the Reserve Bank of New Zealand fully baked in, markets are expected to focus on the central bank’s updated economic forecasts and Governor Adrian Orr’s press conference. The decision will be announced at 01:00 GMT on Wednesday, followed by the presser at 02:00 GMT.
In the Minutes of its October policy meeting, the RBNZ said that “interest rates are constraining economic activity and reducing inflationary pressure as required.” Meanwhile, the policy statement said that the “Committee agreed that interest rates may need to remain at a restrictive level for a more sustained period of time.”
Following the October policy announcement, the official data from Statistics New Zealand (Stats NZ) showed that the Consumer Price Index (CPI) in the 12 months to September rose 5.6%, lower than expectations of 5.9% and the prior quarter’s reading of 6.0%. On a quarterly basis, New Zealand’s inflation increased to 1.8% but fell short of expectations of 2.0%.
The latest labor market report showed that New Zealand's Unemployment Rate climbed to 3.9% in the September quarter, compared with 3.6% last quarter,
Cooling inflation and loosening labor market conditions justify the potential status-quo stance by the central bank, although it remains to be seen if the RBNZ maintains the hawkish rhetoric, as the recent data added signs that the central bank has come to the end of its tightening cycle.
On Monday, the New Zealand Institute of Economic Research’s (NZIER) 'Shadow Board' recommended to leave the cash rate at 5.50%. The Shadow Board said, “some members considered that recent developments in inflation and the labor market, along with the waves of mortgage refixing, provide the Reserve Bank with some comfort that the OCR increases to date would be enough to contain inflation back towards its 1 to 3 percent inflation target band.“
Markets are expecting no changes to the RBNZ’s OCR track in its updated forecasts. The October monetary policy review (MPR) showed that the RBNZ continued to forecast the OCR to remain at 5.50% with around a 40% chance of a further 25 basis point hike to 5.75% in 2024. The track indicated that the central bank does not expect to cut until the first half of 2025.
However, Bloomberg’s “World Interest Rate Probabilities (WIRP) suggests 5.0% odds of a hike February 28. After that, it’s all about the rate cuts and the first one is fully priced in for August 14,” analysts at BBH noted.
How will the RBNZ interest decision impact the New Zealand Dollar?
Should the RBNZ forecasts fan any premature expectations of interest rate cuts in the second half of 2024 while suggesting that the Bank is done with its rate hiking cycle, the New Zealand Dollar is likely to come under intense selling pressure against the US Dollar.
At the time of writing, NZD/USD is sitting at a fresh three-month high above 0.6100. In case of a dovish RBNZ pause, the Kiwi pair could see a sharp corrective downside toward the 0.6000 level.
On the other hand, if RBNZ Governor Orr manages to convince markets that one more interest rate hike remains in the offing, the ongoing uptrend in the NZD/USD pair could gain extra legs, with buyers aiming for the 0.6200 threshold.
The New Zealand Dollar, however, could remain supported on a potential hawkish surprise, in case New Zealand’s new coalition government abandons the central bank’s dual mandate, only focusing on price stability.
Dhwani Mehta, FXStreet’s Senior Analyst, offers a brief technical outlook for trading the New Zealand Dollar on the RBNZ policy announcements: “The NZD/USD pair looks to extend the uptrend, having closed Monday above the critical 200-day Simple Moving Average (SMA) at 0.6090. The 14-day Relative Strength Index (RSI) indicator is sitting beneath the overbought territory while comfortably above the midline, suggesting that there is room for more upside.”
“The next upside hurdle is seen at the 0.6200 round level, above which the July 27 high of 0.6274 will come into play. NZD buyers will then aim for the 0.6300 figure. On the flip side, a sharp sell-off below the 200-day SMA could put the 0.6000 mark at risk. Further down, the confluence of the November 22 low and the 100-day SMA near 0.5995 could emerge as a powerful support for NZD/USD,” Dhwani adds.
New Zealand Dollar price this month
The table below shows the percentage change of New Zealand Dollar (NZD) against listed major currencies this month. New Zealand Dollar was the strongest against the US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -3.55% | -4.01% | -2.19% | -4.48% | -1.86% | -5.02% | -3.36% | |
| EUR | 3.42% | -0.45% | 1.33% | -0.92% | 1.62% | -1.44% | 0.18% | |
| GBP | 3.86% | 0.44% | 1.77% | -0.46% | 2.06% | -0.98% | 0.63% | |
| CAD | 2.14% | -1.31% | -1.78% | -2.25% | 0.32% | -2.77% | -1.15% | |
| AUD | 4.30% | 0.89% | 0.46% | 2.19% | 2.50% | -0.52% | 1.08% | |
| JPY | 1.82% | -1.63% | -2.08% | -0.30% | -2.58% | -3.11% | -1.43% | |
| NZD | 4.78% | 1.40% | 0.97% | 2.72% | 0.52% | 3.00% | 1.60% | |
| CHF | 3.25% | -0.18% | -0.63% | 1.13% | -1.09% | 1.42% | -1.61% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
New Zealand Dollar FAQs
What key factors drive the New Zealand Dollar?
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
How do decisions of the RBNZ impact the New Zealand Dollar?
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
How does economic data influence the value of the New Zealand Dollar?
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
How does broader risk sentiment impact the New Zealand Dollar?
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.