In Wednesday's Asian trading, the New Zealand dollar declined vs a group of significant competitors, continuing its decline against the US dollar and emerging as the worst-performing global currency.
The Reserve Bank of New Zealand decided to keep interest rates at their highest points in fifteen years.
Additionally, the central bank adopted a resolutely pessimistic view on inflation and future monetary policies for the first time, which increased the likelihood of a 0.25% rate drop in August.
The Cost
Today, the NZD/USD pair dropped 0.85% to 0.6075 from a session high of 0.6132.
After falling 0.3% on Monday off four-week highs at 61.54 cents, the pair finished flat on Tuesday.
Currency Loss
The kiwi fell 0.85% versus the US dollar and 0.9% versus the pound today, making it the poorest performing currency among the G8.
It dropped 0.7% versus the yen and 0.8% against the franc, reaching two-week lows.
Additionally, it dropped 0.9% versus its Australian counterpart, reaching a two-year low, and lost 0.8% versus its Canadian counterpart.
RBNZ
Interest rates were kept unchanged by the Reserve Bank of New Zealand at 5.5%, the highest level since October 2008.
But, as time passed and inflation declined, the bank allowed for policy easing.
According to the RBNZ, primary inflation should reach the 1-3% target during the second half of the year.
Since October 2021, the bank has increased interest rates by around 525 basis points in an effort to rein in inflation, which was at an all-time high in 1999.
But such harsh policy tightening caused the economy to slow down significantly and enter a recession in late 2023.
Rates in New Zealand
Analysts now project a 40% likelihood of a 0.25% rate decrease in August and an 80% chance of one in November, following the RBNZ's unexpected shift in stance.
