Forex: NZD/USD rises on RBNZ signals for higher rates in 2014

Written by: Violina Todorova
July 26, 2013

_iNVEZZ.com Friday July 26th:_ The kiwi has been trading higher against its US counterpart today, continuing yesterday’s upward trajectory during which the pair rose to a five-week high at 0.8104. Bullish sentiment again emerged in today’s Asian session and has continued unabated in European trading so far, with the NZD/USD rising to an ongoing intraday high at 0.8102.

The New Zealand dollar took strength yesterday from the decision of the Reserve Bank of New Zealand to hold the official cash rate unchanged at 2.50 percent, though the central bank signalled that inflationary pressure from housing and construction could see a rise in interest rates in 2014.
According to analysts, the RBNZ was more hawkish than had been anticipated, in describing the value of the NZD as ‘high’ rather than ‘overvalued’, and in hinting of an end to monetary stimulus referable to specific identified parameters.

Derek Rankin, director of Rankin Treasury Advisory observed: “The Reserve Bank is getting more and more concerned about inflationary pressures coming out of housing and coming out of construction. If the inflation numbers do start to work their way higher then the Reserve Bank will need to lean against that by looking at raising interest rates.”
Rankin noted that “The response from the market has been to bring forward the time when the Reserve Bank may be forced to start to raise rates.”

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