NZD / USD extends rally to new 3-year highs above 0.7400

• NZD / USD is posting impressive gains on Wednesday, trading above 0.7400.
• NZD capitalizes on RBNZ’s risk flows and optimistic outlook.
• The US dollar index appears to end the day little changed.

The pair NZD / USD It started the day on a firm footing and posted strong gains during Asian business hours. After entering a consolidation phase during the European session, the pair regained its traction and touched its highest level in three years at 0.7411. At time of writing, the pair was up 0.9% at 0.7405.

Following its February monetary policy meeting, the Reserve Bank of New Zealand (RBNZ) left its policy rate unchanged at 0.25% as expected and held large-scale asset purchases stable at NZD 100 billion. Although the bank reaffirmed its commitment to take policy action if necessary, it revised the GDP growth forecast for 2021 to 4% from 3.6%.

The bullish outlook for the RBNZ provided a boost to the kiwi, but renewed strength in the USD in the second half of the day limited the rise in the NZD / USD.

DXY is still on its way to close plane

Supported by a sharp rally seen in US Treasury yields, the US dollar index rose to a daily high of 90.43.

However, the positive shift in market sentiment, reflected by a decisive rally in major Wall Street indices, made it difficult for the USD to maintain its strength and allowed the risk-sensitive NZD to extend its rally. At the moment, the DXY is virtually unchanged on the day at 90.20 and the S&P 500 Index is up 1.15%.

On Thursday, market participants will closely follow New Zealand’s business confidence data and activity outlook.

Technical levels