- The NZD/USD is strengthened to about 0.5965 in the Asian session on Wednesday, rising 0.20% in the day.
- The RBNZ cut its OCR at 25 PB to 3.25% from 3.5% at its May meeting.
- The US CB confidence index rose to 98.0 in May compared to 86.0 previous.
The NZD/USD gains land to around 0.5965 during Wednesday’s Asian negotiation hours. The New Zealand dollar (NZD) can be seen against the US dollar (USD) after the decision of interest rates of the New Zealand Reserve Bank (RBNZ). The operators will focus their attention on the minutes of the Federal Open Market Committee (FOMC), which will be published later on Wednesday.
As expected widely, the RBNZ decided to reduce the official cash (OCR) rate by 25 basic points (PB) to 3.25% from 3.5% after completing the May policy meeting on Tuesday. This marks the sixth consecutive meeting of rate cuts. The Kiwi cuts losses in an immediate reaction to the decision of RBNZ interest rates.
According to the minutes of the RBNZ interest rates, inflation is within the target range, and the Committee is well positioned to respond to both national and international developments to maintain medium -term price stability. The New Zealand Central Bank projected that the OCR will be at 3.12% in September 2025 and 2.87% in June 2026, increasing expectations of more feats of fees.
On the other hand, the USD’s optimistic economic data on Tuesday could boost the USD and limit the torque potential. The US Consumer Trust Index rose to 98.0 in May from 86.0 (reviewed from 85.7), revealed the Board Conference on Tuesday. In addition, orders for durable goods in the US fell by 6.3% in April, compared to an increase of 7.6% in March (reviewed from 9.2%). This figure was stronger than -7.9% expected.
RBNZ FAQS
The New Zealand Reserve Bank (RBNZ) is the Central Bank of the country. Its economic objectives are to achieve and maintain the stability of prices – won when inflation, measured by the consumer price index (CPI), falls within the range of between 1% and 3% – and support the maximum sustainable employment.
The Monetary Policy Committee (MPC) of the New Zealand Reserve Bank (RBNZ) decides the appropriate level of the official cash rate (OCR) according to its objectives. When inflation is above the objective, the bank will try to control it by raising its key, making money borrowing for homes and companies and cooling the economy. The highest interest rates are generally positive for the New Zealand dollar (NZD), since they generate greater returns, which makes the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken the NZD.
Employment is important for the New Zealand Reserve Bank (RBNZ) because an adjusted labor market can feed inflation. The objective of the “maximum sustainable employment” is defined as the greatest use of labor resources that can be maintained over time without creating an acceleration of inflation. “When employment is at its sustainable maximum level, there will be low and stable inflation. However, if employment is above the sustainable maximum level for too long, it will eventually cause prices to increase more and more quickly, which will require the MPC to increase interest rates to maintain inflation under control,” says the Central Bank.
In extreme situations, the New Zealand Reserve Bank (RBNZ) can implement a monetary policy tool called quantitative flexibility. The QE is the process by which the RBNZ prints local currency and uses it to buy assets (generally government or corporate bonds) of banks and other financial institutions with the objective of increasing the internal money supply and stimulating economic activity. The qe generally results in a neo -Zealand dollar (NZD) weaker. The QE is a last resort when it is unlikely that simply lowering interest rates achieve the objectives of the Central Bank. The RBNZ used it during the Covid-19 Pandemia.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
