AUD/NZD jumps above 1.1050 as RBNZ leaves its cash rate on hold at 5.5%
-
AUD/NZD
gains
momentum
around
1.1075
in
Wednesday’s
Asian
session,
up
0.63%
on
the
day. -
The
RBNZ
maintained
the
Official
Cash
Rate
(OCR)
unchanged
at
5.50%
at
its
July
meeting
on
Wednesday,
as
widely
expected. -
The
RBA’s
hawkish
stance
lifts
the
Aussie
against
the
Kiwi.
The
AUD/NZD
cross
attracts
some
buyers
near
1.1075
during
the
Asian
trading
hours
on
Wednesday.
The
cross
gains
momentum
after
the
Reserve
Bank
of
New
Zealand
(RBNZ)
kept
its
cash
rate
unchanged
in
its
July
monetary
policy
meeting.
The
New
Zealand
Dollar
(NZD)
edges
lower
as
the
RBNZ
decided
to
keep
the
Official
Cash
Rate
(OCR)
steady
at
5.50%,
as
widely
expected
by
the
markets.
This
marked
the
eighth
consecutive
meeting
with
no
change
in
rates.
According
to
the
Minutes
of
the
RBNZ
interest
rate
meeting,
the
board
notes
a
risk
that
domestically
driven
inflation
could
be
more
persistent
in
the
near
term.
The
central
bank
expected
headline
inflation
to
return
to
within
the
1
to
3
%
target
range
in
the
second
half
of
this
year.
Meanwhile,
New
Zealand
swaps
imply
25
basis
points
(bps)
of
RBNZ
rate
cuts
for
October
versus
16
bps
before
the
RBNZ
statement.
Elsewhere,
the
weaker
Chinese
economic
data
exerts
some
selling
pressure
on
the
China-proxy
Kiwi.
China’s
Consumer
Price
Index (CPI)
increased
0.2%
YoY
in
June,
compared
to
a
rise
of
0.3%
in
May,
below
the
consensus
of
0.4%.
On
a
monthly
basis,
the
CPI
inflation
arrived
at
-0.2%
MoM
in
June
versus
the
previous
reading
of
a
0.1%
decline,
worse
than
the
-0.1%
expected.
On
the
Aussie
front,
the
hawkish
stance
of
the
Reserve
Bank
of
Australia
(RBA)
provides
some
support
to
the
Australian
Dollar
(AUD).
The
recent
hotter
inflation
data
spurred
the
expectation
that
the
RBA
would
raise
a
25
bps
rate
in
the
September
24
meeting.
RBNZ
FAQs
The
Reserve
Bank
of
New
Zealand
(RBNZ)
is
the
country’s
central
bank.
Its
economic
objectives
are
achieving
and
maintaining
price
stability
–
achieved
when
inflation,
measured
by
the
Consumer
Price
Index
(CPI),
falls
within
the
band
of
between
1%
and
3%
–
and
supporting
maximum
sustainable
employment.
The
Reserve
Bank
of
New
Zealand’s
(RBNZ)
Monetary
Policy
Committee
(MPC)
decides
the
appropriate
level
of
the
Official
Cash
Rate
(OCR)
according
to
its
objectives.
When
inflation
is
above
target,
the
bank
will
attempt
to
tame
it
by
raising
its
key
OCR,
making
it
more
expensive
for
households
and
businesses
to
borrow
money
and
thus
cooling
the
economy.
Higher
interest
rates
are
generally
positive
for
the
New
Zealand
Dollar
(NZD)
as
they
lead
to
higher
yields,
making
the
country
a
more
attractive
place
for
investors.
On
the
contrary,
lower
interest
rates
tend
to
weaken
NZD.
Employment
is
important
for
the
Reserve
Bank
of
New
Zealand
(RBNZ)
because
a
tight
labor
market
can
fuel
inflation.
The
RBNZ’s
goal
of
“maximum
sustainable
employment”
is
defined
as
the
highest
use
of
labor
resources
that
can
be
sustained
over
time
without
creating
an
acceleration
in
inflation.
“When
employment
is
at
its
maximum
sustainable
level,
there
will
be
low
and
stable
inflation.
However,
if
employment
is
above
the
maximum
sustainable
level
for
too
long,
it
will
eventually
cause
prices
to
rise
more
and
more
quickly,
requiring
the
MPC
to
raise
interest
rates
to
keep
inflation
under
control,”
the
bank
says.
In
extreme
situations,
the
Reserve
Bank
of
New
Zealand
(RBNZ)
can
enact
a
monetary
policy
tool
called
Quantitative
Easing.
QE
is
the
process
by
which
the
RBNZ
prints
local
currency
and
uses
it
to
buy
assets
–
usually
government
or
corporate
bonds
–
from
banks
and
other
financial
institutions
with
the
aim
to
increase
the
domestic
money
supply
and
spur
economic
activity.
QE
usually
results
in
a
weaker
New
Zealand
Dollar
(NZD).
QE
is
a
last
resort
when
simply
lowering
interest
rates
is
unlikely
to
achieve
the
objectives
of
the
central
bank.
The
RBNZ
used
it
during
the
Covid-19
pandemic.
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