NZ Dollar Rises Sharply After RBNZ's Rate Hike Hint

The NZ dollar gained ground against its key counterparts in the Asian session on Wednesday, after the Reserve Bank of New Zealand kept its official cash rate unchanged and signaled about the possibility of a rate hike by September next year.

The Monetary Policy Committee of the RBNZ decided to keep its OCR unchanged at the record low of 0.25 percent, in line with expectations.

The Committee also will keep the Large Scale Asset Purchase (LSAP) Program of up to NZ$100 billion and the Funding for Lending Program (FLP) operation unchanged.

The global economic outlook has continued to improve, with ongoing fiscal and monetary stimulus underpinning the recovery, the central bank said in a statement accompanying the decision. New Zealand's commodity export prices have benefited from this rise in global demand. However, divergences in economic activity, both within and between countries, remain significant. The sustainability of the global economic recovery remains dependent on the containment of COVID-19.

In its OCR projections, the RBNZ projected that the cash rate is likely to raise to 0.5 percent by September 2022 and to 1.5 percent by the end of 2023.

The kiwi spiked higher to a 9-day high of 1.6759 against the euro and a 3-month high of 0.7317 against the greenback, up from Tuesday's closing values of 1.6939 and 0.7224, respectively. Next key resistance for the kiwi is seen around 1.62 against the euro and 0.75 against the greenback.

The kiwi approached 79.59 against the yen, its biggest level since April 2018. The pair had ended yesterday's deals at 78.57. The currency is seen finding resistance around the 82.00 level.

The kiwi jumped to near a 3-month high of 1.0648 against the aussie, compared to Tuesday's close of 1.0714. The kiwi may test resistance around the 1.03 level, if it rises again.

Looking ahead, Swiss economic sentiment index for May is set for release in the European session.

At 10:00 am ET, Federal Reserve Governor Randal Quarles will deliver a speech about insurance regulation at an online event hosted by the National Association of Insurance Commissioners International Insurance Forum.

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