The New Zealand dollar has weakened markedly against the US dollar. The current quote is 0.6140.
The Reserve Bank of New Zealand raised its interest rate by 25 basis points at its May meeting and made it clear that it no longer intends to raise the rate as part of its fight against inflation. This news put a lot of pressure on the kiwi.
The interest rate rose to 5.50% per annum from the earlier 5.25%. The decision had been expected by the market. The rate has now probably reached its peak.
The market was surprised that the RBNZ left no real options for further tightening of the monetary policy. The regulator was, in fact, at the forefront of monetary tightening. During the hike, the rate rose by 525 basis points. This is more than the Fed has done. The RBNZ is now probably relying on the delayed effect of what was done earlier.
Nevertheless, the NZD has been seriously affected.
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