- The Reserve Bank of New Zealand is forecast to hold its key interest rate at 3.25% on Wednesday.
- The RBNZ hinted that it is close to the end of the easing cycle as “inflation is within the target band”.
- The New Zealand Dollar could experience a big reaction to the language in the RBNZ policy statement.
The Reserve Bank of New Zealand (RBNZ) is expected to keep the Official Cash Rate (OCR) steady at 3.25% following the conclusion of its July monetary policy meeting on Wednesday.
The decision will be announced at 02:00 GMT. This time, the announcement won’t be accompanied by the Monetary Policy Statement (MPS) and followed by acting RBNZ Governor Christian Hawkesby’s press conference.
Therefore, the language in the policy review will be closely scrutinized for fresh cues on the status of the RBNZ’s easing cycle, which could significantly impact the performance of the New Zealand Dollar (NZD).
What to expect from the RBNZ interest rate decision?
The RBNZ’s May policy statement signaled that the bank is close to the end of its rate-cutting cycle that began in August 2024. The kiwi central bank has cut rates by a total of 225 basis points (bps) since then.
In the statement, the RBNZ said that Inflation is within the target band and the OCR is close to its neutral range between 2%-4%.
The RBNZ also noted that “the full economic effects of cuts in the OCR since August 2024 are yet to be fully realized,” adding that the economic uncertainty remains high due to US tariffs.
Furthermore, New Zealand’s Consumer Price Index (CPI) inflation and Gross Domestic Product (GDP) exceeded expectations in the first quarter (Q1).
The NZ CPI rose 2.5% YoY in Q1, accelerating from the 2.2% increase seen in Q4 2024 and a 2.3% expected growth. Meanwhile, the island nation’s GDP rose 0.8% in the March quarter from the previous three months, faster than forecasts for a 0.7% increase.
Against this backdrop, the RBNZ could prefer to stand pat, awaiting the second-quarter inflation and labor data for fresh economic assessment before the August 19 policy meeting. Industry experts are expecting the next RBNZ rate reduction in August.
How will the RBNZ interest rate decision impact the New Zealand Dollar?
The NZD/USD pair is in a corrective mode from nine-month highs of 0.6121 reached a week ago. The kiwi’s downside is sponsored by the reviving safe-haven appeal of the US Dollar (USD) amid fresh tariff war fears and lingering US fiscal concerns.
The pair could extend its retracement if the RBNZ leaves the door ajar for an additional rate cut this year while acknowledging emerging risks from overseas trade uncertainty.
Conversely, the NZD could resume its uptrend if the RBNZ explicitly signals at the end of its easing cycle amid the improving economic outlook and the broad achievement of its inflation target.
Dhwani Mehta, Asian Session Lead Analyst at FXStreet, offers a brief technical outlook for NZD/USD and explains:
“The Kiwi pair has found support at the critical 50-day Simple Moving Average (SMA) at 0.5988 while the 14-day Relative Strength Index (RSI) looks to reclaim the midline. Buyers need acceptance above the 21-day SMA at 0.6037 for a sustained recovery. Further up, the 0.6100 round level will be tested before buyers take on the 0.6150 psychological barrier.”
“If the 50-day SMA support gives way, a steep drop toward the 100-day SMA at 0.5876 cannot be ruled out. Additional declines will target the 200-day SMA at 0.5848,” Dhwani adds.
New Zealand Dollar PRICE Last 7 days
The table below shows the percentage change of New Zealand Dollar (NZD) against listed major currencies last 7 days. New Zealand Dollar was the weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.38% | 0.92% | 1.45% | 0.29% | 0.53% | 1.22% | 0.44% | |
| EUR | -0.38% | 0.55% | 0.98% | -0.09% | 0.23% | 0.82% | 0.07% | |
| GBP | -0.92% | -0.55% | 0.54% | -0.60% | -0.31% | 0.27% | -0.47% | |
| JPY | -1.45% | -0.98% | -0.54% | -1.09% | -0.91% | -0.24% | -0.98% | |
| CAD | -0.29% | 0.09% | 0.60% | 1.09% | 0.21% | 0.87% | 0.14% | |
| AUD | -0.53% | -0.23% | 0.31% | 0.91% | -0.21% | 0.59% | -0.14% | |
| NZD | -1.22% | -0.82% | -0.27% | 0.24% | -0.87% | -0.59% | -0.75% | |
| CHF | -0.44% | -0.07% | 0.47% | 0.98% | -0.14% | 0.14% | 0.75% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the New Zealand Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent NZD (base)/USD (quote).
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
