The New Zealand dollar sharply fell

June 11, 2015

On Thursday, the NZD/USD pair is trading "under pressure" after the decisions of the Reserve Bank of New Zealand.

The New Zealand dollar remains under pressure. At first it was due to the not too pleasant Chinese macro data, now - the decisions of the local regulator.

At the June meeting the Reserve Bank of New Zealand decided to reduce the interest rate by 25 basis points, from 3.5% to 3.25% per annum. It turns out that the current level of rates is the lowest since the third quarter of 2010. In follow-up comments the RBNZ said that inflation has been kept at not the most attractive level, but by the beginning of next year will return to the target range of 1-3%.But now the situation with the consumer price index is not the most stable: the prices of food and dairy products are low, and the cost of energy and fuel is high. A balance is quite possible to achieve, but the inflation picture has to be monitored very carefully.

The RBNZ believe that the position of export companies will be difficult for some more time. Not many believe that export earnings will increase in the near future. This forces the government of New Zealand to conduct a more cautious monetary policy.

In general, the New Zealand regulator has hinted that they are ready to continue easing the monetary policy, if the inflationary component demands it. In all of this the optimal level of RBNZ rate is considered to be 4.5%.
 
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