The Reserve Bank of New Zealand (RBNZ) has announced a surprising halt to its pandemic bond purchase programme leading to a surge in NZD/USD. Jane Foley, Senior FX Strategist at Rabobank, expects the kiwi to grind higher towards 0.73 on a three-month view.
RBNZ takes a decidedly hawkish tilt
“While the market had last month begun to speculate as to the possibility that the OCR could be raised before the end of the year, the news that the Large Scale Asset Purchase programme would be halted next week surprised most RBNZ watchers and consequently led to a surge in the value of the NZD.”
“The current strength on the USD, which is being drawn from speculation that various FOMC members have become more concerned about inflation risk, could facilitate a more hawkish element in other central banks.”
“Despite the policy change from the RBNZ, NZD/USD is trading over 3% lower relative to the start of last month on the back of board-based USD strength. We look for some modest appreciation back towards NZD/USD 0.73 on a 3-month view.”