In a widely anticipated move, the Reserve Bank of New Zealand decided to leave interest rates at a record low of 1.75% during its latest decision. However, the one major development that materialized was a sense that the New Zealand dollar was overvalued relative to other global peers. According to the statement from RBNZ Governor Graeme Wheeler, “the exchange rate remains higher than is sustainable for balanced growth.”
Furthermore, he cited the strength of the currency as one of the predominant factors behind disinflation. Any weakening in the New Zealand dollar would help raise import prices, acting as a net positive for inflation. Nevertheless, the outlook remains largely positive despite remarks that “monetary policy will remain accommodative for a considerable period.” The NZDUSD pair fell after the decision, dipping below 0.7200 as downside momentum accelerates.