New Zealand Dollar: Downside remains limited following RBNZ surprise – OCBC

An unexpected RBNZ decision to leave the OCR at 2.75% sent the New Zealand Dollar (NZD) lower, according to OCBC strategists Sim Moh Siong Christopher Wong. Despite the hold, the Reserve Bank of New Zealand (RBNZ) continues to signal tighter policy ahead, with two further rate rises expected in December and 1Q27. That policy stance should limit additional NZD losses following the sell-off, with 0.5600 identified as the key near-term level for NZD/USD.

RBNZ holds rates but retains hawkish stance

"The NZD sold off sharply after the Reserve Bank of New Zealand October Monetary Policy Review unexpectedly voted 4-3 to hold the OCR at 2.75%, defying widespread expectations for a 25bp hike."

"Notably, Governor Anna Breman voted with the majority to hold, while Chief Economist Paul Conway backed a hike. The majority preferred to give the July and September rate increases more time to work through the economy, particularly with domestic demand still subdued."

"Still, the decision was more of a pause than a dovish pivot. The RBNZ said tighter monetary policy is likely to be required, although the timing remains data-dependent. Attention now shifts to December."

"We continue to expect two further hikes, in December and 1Q27, which should limit further NZD downside. For NZD/USD, 0.5600 remains the key near-term level to watch after being tested around the decision."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Learn more.)