- RBNZ NZ Dollar Concerns
- RBNZ Monetary Policy
- New Zealand Economic recovery
NZD/USD market sentiments turned bearish on Wednesday, as the Reserve Bank of New Zealand aroused concerns about a strengthened NZ dollar. The pair edged lower after coming under pressure on Tuesday following fears of the U.S-China trade deal.
The pair has struggled to hold on to gains after rallying to three-month highs early in the month. The selloff has come at the backdrop of growing concerns about the New Zealand economy that is trying to recover from the disruptions triggered by COVID-19.
On Wednesday morning, the Selloff came even on RBNZ, opting to keep interest rates unchanged at 0.25%. The central bank also set the quantitative easing program at $60 billion. The policymakers also reiterated readiness to act and implement other monetary policy measures to support the economy, which is on a recovery path.
The NZD/USD pair, on the other hand, tumbled after the central bank reiterated that a strengthened NZ dollar could pose more challenges amidst the CIOVID-19 pandemic around the dollar.
The appreciation for starters continues to pressure the country’s exports, which might force policymakers to intervene. The fact that policymakers would want a weakened NZ dollar to support the export businesses were largely interpreted as dovish conversely the NZD/USD selloff.
U.S Dollar Weakness
In addition to a strengthened NZ dollar, the central bank also reiterated that the pandemic’s global economic disruptions continue to take a toll on economic activity. The closing of borders is already fuelling low economic activity as unemployment levels continue to edge higher. Measures to mitigate the pandemic have only resulted in a global economic downturn and disrupted international trade.
A slide in the NZD/USD pair was curtailed by weakness in the U.S. dollar, which weakened across the board after upbeat Europe data boosted hopes of global economic recovery. The recovery has helped boost appetite for riskier currencies sending the greenback lower.