Currency Analyst since 2010

Commerzbank: when will RBNZ intervene?

The Reserve Bank of New Zealand has raised the benchmark interest rate since March from 2.50% to 3.25%. Analysts at Commerzbank point out that that although this has an impact on the nation’s PMI which eased from 58.3 points in March to 52.7 in May, in June the index stabilized again at 53.3. This will unlikely affect the actions of the RBNZ as the regulator’s trying to limit inflationary risks. On the contrary, the small decline in PMI may mean that New Zealand can probably avoid overheating.

At the same time, NZD/USD is painfully close to the record high of $0.8843 reached in August 2011 and this should clearly make NZD bulls cautious.

According to Commerzbank, the RBNZ had been considering interventions to counteract the strength of the kiwi weeks ago despite the fact that it is in the middle of a rate hike cycle. Moreover the RBNZ is likely to raise its key rate again the week after next, but can announce a break after that. As a result NZD/USD should begin to run out of steam.

If NZD/USD reaches $0.9000, the RBNZ will intervene – either verbally or even actually.

Chart. Weekly NZD/USD

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