Home Forex News NZD/USD Tanks Despite RBNZ’s Decision To Maintain Cash Rate At 0.25%

NZD/USD Tanks Despite RBNZ’s Decision To Maintain Cash Rate At 0.25%

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  • Reserve Bank of New Zealand executives expects rough road ahead.
  • RBNZ to hold official cash rate steady.
  • Bond purchase program expanded from $30 billion to $60 billion.

The NZD/USD exchange rate was off to a rough start on Wednesday morning with the bears taking over after statements from the Reserve Bank of New Zealand. The main one was a downbeat statement that it expects the global economy to go through some rough times for the next 12 or so months. The bank also decided not to adjust the official cash rate, which means that it will hold steady at 0.25%.

The NZD/USD’s overall performance on Wednesday morning was bearish with the technical review indicating that it will likely continue to perform below the 0.6046. The price has already demonstrated support around the 0.6006. If the bearish momentum prevails, the currency pair is expected to contend with the 0.5957 and 0.5929 support levels.

NZD/USD outlook

The RBNZ is keen on doing all that it can to support the New Zealand economy and preventing it from failing under the weight of the coronavirus’s economic impact. One of the ways in which it aims to do that is through its bond repurchase program, which it just announced an increase from $30 billion to $60 billion. The central bank expects this move plus the stable cash rate to provide buoyancy for the New Zealand dollar.

The central bank decided to maintain the cash rate at 0.25% while increasing the bond repurchase program so that it can drastically reduce borrowing costs, especially with the gloomy economic outlook. The New Zealand Dollar will likely continue to experience declining value, especially now that the RBNZ is demonstrating signs of possibly moving towards negative rates.

The NZD experienced some gains in April, which indicated recovery from March lows thanks to fiscal stimulus programs aimed at cushioning the country’s economy from the economic downturn caused by COVID-19. However, the rise in new infections and impending economic recession might continue to weigh down on the New Zealand Dollar.

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