The Kiwi, New Zealand’s national bird, can’t fly.
The same could be said about the New Zealand dollar today.
It’s getting smoked.
Just look at the 5-minute NZD/USD chart below.
And if you reckon that looks pretty ugly, check out the daily chart.
It’s down 6.5% since mid-April, currently sitting at .6920.
Today’s rout coincides with the release of the Reserve Bank of New Zealand’s (RBNZ) May monetary policy statement, the first under the leadership of newly-appointed governor Adrian Orr.
While the RBNZ left the cash rate unchanged at 1.75%, where it’s sat for over one-and-a-half years, Orr certainly left an initial impression, delivering a dovish performance that saw the Kiwi tumble.
“The statement was clever in its simplicity,” said Jarrod Kerr, chief economist at Kiwibank.
“The message was crystal clear and gave New Zealanders some certainty on interest rates. The labour market has tightened and is running close to trend. But inflation is unlikely to return to target — 2% — until December 2020.”
Kerr says the RBNZ’s decision to delay the expected timing of its first rate hike until the second half of 2019 was “just enough to give a much needed ‘dovish tilt’ for financial markets”.
“The subtle shift towards a more dovish bias suggests the likely take off for policy normalisation has shifted closer to 2020,” he says.
“Our best guess is the RBNZ will be in a position to start taking their foot off the accelerator around the middle of next year.
“We had pencilled in a May MPS lift off date. The risk is clearly tilted towards a November MPS lift off date.
“The difference is significant enough. But the key message remains, don’t fear rapidly rising interest rates — not this year, or next.”
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