FXstreet.com (Barcelona) - After reaching a 1-week low at 0.5525 along the yesterday session, the NZD/USD has risen around 255 pips from this level to reach 0.5780 today, fresh two-weeks high ahead the RBNZ Interest Rate Decision. Currently the pair is trading around 0.5770/80 after rising 2.90% so far today from opening price at 0.5615.
Yesterday, the Kiwi lost 0.23% from 0.5628 opening price, reaching 0.5632 as highest and 0.5525 as lowest, to close the day at 0.5615.
RBNZ Interest Rate Decision is expected to be a 50 bp rate cut from 3.0% to 2.50%, a record low to the RBNZ.
According to Kathy Lien, Director of Currency Research at GFT, kiwi is up around 3.0% today which suggests that forex traders expect a kiwi positive decision from the RBNZ: Yet the recent rally in the New Zealand dollar will lead to tighter monetary conditions for the region as a whole. Prime Minister John Key also openly admitted earlier this month that the country cannot afford additional fiscal spending because it could provoke a credit ratings downgrade. Instead, they are planning to cut government spending. One of few ways to offset lower fiscal stimulus is through monetary stimulus and therefore the RBNZ may be compelled to over deliver and possibly talk of further easing to come.
Lien concludes: With interest rates at relatively high levels, the RBNZ is not ready to embark on Quantitative Easing. Currency intervention is also unlikely because that has always been a losing battle for the central bank.
For more information, read our latest forex news.