Kiwi dollar soars after RNBZ rate decision

The decision to leave policy unchanged has supercharged NZD/USD, which has rallied to its highest level since March 2019.

New Zealand central bank leaves rates unchanged

Unlike other central banks, New Zealand’s Reserve Bank (RBNZ) has decided to leave policy unchanged, for both interest rates and for its quantitative easing programme.

The decision to hold fast on interest rates at 0.25% was expected, but markets had expected that the quantitave easing (Q/E) target and potentially the duration of purchases would be extended. This move to remain unchanged caught the market by surprise, bolstering the New Zealand dollar against a host of other currencies.

A move to negative interest rates also now seems much less likely, another factor that has helped to lift the currency. Instead rates will remain above 0%, although a move higher seems unlikely given the bleak economic outlook and the potential for further economic weakness later in 2021.

NZD/USD technical analysis

The NZD/USD pair has continued its recovery in recent weeks, pushing to its highest level since March 2019, and leaping through the summer highs around $0.6787. Further gains target $0.693, an area that marked resistance from December 2018 until March 2019, which was followed by a fresh move lower.

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