24 Jul 2014
NZD weaker post-RBNZ - BTMU
FXStreet (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ, observed the weaker tone in the NZD following the RBNZ rate hike.
Key Quotes
"The New Zealand dollar has weakened sharply in the Asian trading session with the NZD/USD rate falling back below the 0.8600-level. The New Zealand dollar has weakened after the RBNZ stepped up verbal intervention at their monetary policy meeting today warning that the currency’s level is “unjustified” and “unsustainable”, and there is “potential for a significant fall”."
"The strong verbal warning also signals that the RBNZ maybe moving closer to intervening directly to weaken the New Zealand dollar. The New Zealand dollar had risen to a new record high earlier this month despite the ongoing deterioration in New Zealand’s terms of trade as global dairy prices have now fallen by around 30% from their peak from earlier this year."
"RBNZ monetary tightening expectations have reinforced carry demand for the New Zealand dollar so far this year lifting it to increasingly overvalued levels. The New Zealand dollar was also undermined overnight by the interest rate market dampening expectations for the amount of RBNZ rate hikes ahead."
"The RBNZ raised its key policy rate by a further 0.25 point to 3.50% but also signalled that “it is prudent that there now be a period of assessment before interest rates adjust further towards a more neutral level”. The interest rate market is now only discounting around one more 0.25 point hike later in 2014."
Key Quotes
"The New Zealand dollar has weakened sharply in the Asian trading session with the NZD/USD rate falling back below the 0.8600-level. The New Zealand dollar has weakened after the RBNZ stepped up verbal intervention at their monetary policy meeting today warning that the currency’s level is “unjustified” and “unsustainable”, and there is “potential for a significant fall”."
"The strong verbal warning also signals that the RBNZ maybe moving closer to intervening directly to weaken the New Zealand dollar. The New Zealand dollar had risen to a new record high earlier this month despite the ongoing deterioration in New Zealand’s terms of trade as global dairy prices have now fallen by around 30% from their peak from earlier this year."
"RBNZ monetary tightening expectations have reinforced carry demand for the New Zealand dollar so far this year lifting it to increasingly overvalued levels. The New Zealand dollar was also undermined overnight by the interest rate market dampening expectations for the amount of RBNZ rate hikes ahead."
"The RBNZ raised its key policy rate by a further 0.25 point to 3.50% but also signalled that “it is prudent that there now be a period of assessment before interest rates adjust further towards a more neutral level”. The interest rate market is now only discounting around one more 0.25 point hike later in 2014."