The New Zealand dollar already started the week on the back foot on the heel of a disappointing second quarter’s inflation figures. It was only the beginning. On Thursday, the Kiwi took another hit but from the central bank this time. Following its monetary policy meeting, the Reserve Bank of New Zealand decided unsurprisingly to hold the official cash rate at 1.75%. However, the monetary institution made a dramatic shift in its language as it made clear it is not happy, at all, with the current strength of the Kiwi.
Assistant Governor McDermott suggested for a second that the bank could move back to intervention should the circumstances require so. However, he added as he tried to allay an overreaction of markets that it was just a little nudge, rather than “a slap across the face”.
NZD/USD was off 0.70% after the release of the statement and the press conference of Governor Wheeler. McDermott’s comments were the final in the coffin, sending the local dollar down another 0.60% to 0.7267. We maintain our bearish view on the pair with the 0.72 level as next target in the short-term.
By Arnaud Masset