New Zealand dollar stronger after the bank's decision

Reserve Bank of New Zealand it raised interest rates for the fifth time in a row. The hike by 50 basis points announced today from 1,5%. to 2%, was in line with the market consensus, but it could have a positive impact on the performance of the New Zealand dollar.

The Council of the Reserve Bank of New Zealand (RBNZ) has signaled that in the face of soaring prices, the spot rate will peak at 3,95 percent. in Q3,35 this year, while only in February this year. it was assumed that the peak of interest rates in New Zealand at 2024 percent. will fall out only in XNUMX.

The country's economy is strong, but in an uncertain environment

The RBNZ representatives argued that the larger and earlier increase reduces the risk of inflation persistence, while ensuring greater flexibility in the light of the highly uncertain global economic environment.

The Bank's decision-makers concluded that the economy remained strong in New Zealand itself. And it owes this to: a solid labor market, a favorable situation for households, continued fiscal support, good trade conditions and the easing of restrictions related to the COVID-19 program.

RBNZ representatives estimated that when total supply and demand approached equilibrium, interest rates may return to a lower, neutral level.

The NZD / USD rate is back from 2-year lows

NZD / USD exchange rate This morning it rose by 0,8%, exceeding 0,6500. This is the highest level since the beginning of the month. Even in the first half of May, NZD / USD was at 0,6200, which is the lowest level in two years.

The New Zealand dollar's recovery against the USD may be helped by the belief that investors have already discounted the entire cycle of US interest rate hikes. It can therefore be observed that the NZD / USD exchange rate in May 2022 is trying to quickly recover from relatively low levels. Perhaps he is helped by the fact that in the US the market may have already discounted interest rate hikes to a large extent, and in other parts of the world, including New Zealand, not yet.