NZD/USD: How high can the kiwi climb after the RBNZ decision?

The NZD/USD price bounced back on Wednesday after the latest interest rate decision by New Zealand’s Central Bank (RBNZ). It rose to a high of 0.7315, which was the highest level since February this year. The New Zealand dollar also gained against other currencies like the Australian dollar, sterling, and the euro.

RBNZ points to high interest rates

The RBNZ concluded its monetary policy meeting and did what most analysts were expecting. The bank left interest rates unchanged at 0.25%, where they have been since 2020. The bank also decided to leave its quantitative easing policy unchanged at N$100 billion.

The NZD/USD rallied because the bank pointed that it will start tweaking interest rates in the fourth quarter of 2022. That was was sooner than many analysts were expecting. It also hinted that it will start tapering asset purchases in the coming year. Further, the bank also boosted its outlook for the country’s economic growth. 

The decision came at a time when New Zealand’s economy is making a swift economic recovery. The labour market is tightening and the overall retail sales is bouncing back. At the same time, the country’s home prices have jumped because of the rising demand because of low-interest rates.

Data published on Wednesday also showed that the country’s trade surplus was rising. In April, the surplus widened to N$388 million from the previous N$38 million. This happened as the country’s exports declined to more than N$5.37 billion while imports fell to N$4.9 billion. 

The RBNZ joined several other central banks that have recently turned hawkish. For example, in its most recent decision, the Bank of Canada started tapering its asset purchases by lowering the monthly purchases to C$3 billion. Similarly, Norges Bank has hinted that a rate hike will come later this year while the Bank of England is expected to announce tapering plans later this year. The Federal Reserve, on the other hand, has said that the easy money policy will last for longer.

NZD/USD analysis

The three-hour chart shows that the NZD/USD pair jumped sharply after the RBNZ decision. It rose to 0.7315, which was slightly above the previous resistance at 0.7300. The price remained above the 25-day and 15-day moving average and the ascending purple trendline. It is also above the important support level at 0.7270. Therefore, the pair will likely keep rising, with the next key target being at the psychological level of 0.7350.