New Zealand Dollar Falls to Over 2-Week Low

The New Zealand dollar fell to around $0.561 on the first trading day of November, its weakest level in more than two weeks, as investors turned their attention to the upcoming domestic jobs report and general election. Employment is forecast to rise by a moderate 0.4% in the third quarter, with the unemployment rate edging down to 5.5%. A stronger-than-expected result could reinforce market expectations of a rate hike in December, which is currently priced at around 75%. Meanwhile, New Zealanders will head to the polls on Saturday, with the latest surveys showing no clear winner or likely coalition grouping. The political uncertainty adds another consideration for investors, particularly given the potential implications of a change in government for fiscal policy and the broader economic outlook. Last week, the Reserve Bank of New Zealand unexpectedly kept its official cash rate unchanged at 2.75%, following two consecutive rate hikes.

The New Zealand dollar edged up to $0.564 on Friday, extending its recovery from a two-week low, as investors assessed the Reserve Bank’s policy outlook. RBNZ Assistant Governor Karen Silk indicated that a December rate hike could be warranted if price pressures persisted and domestic and global economic conditions proved more resilient than expected. Her remarks followed comments from Governor Anna Breman on Thursday, who signaled a strong likelihood of a rate increase in December, adding that all MPC members agreed further tightening would likely be likely, though the timing would depend on inflation and the economic outlook. The central bank caught markets off guard on Wednesday by holding its cash rate at 2.75%, while leaving the door open for future hikes. Currently, traders imply a 76% chance of a hike in December and see the OCR peaking at 3.75% or higher. Despite the gains, the kiwi is down 1% this week after two straight weeks of advances, but remains up 0.1% for the month.

The New Zealand dollar slipped to $0.561 on Thursday, hovering at a two-week low, as the Reserve Bank’s unanticipated rate decision the previous day continued to influence investor sentiment. The central bank held its cash rate at 2.75% on Wednesday, defying market expectations of a 25-bp hike, though it left the door open for further tightening. RBNZ Governor Anna Breman reinforced this outlook earlier today, saying the chances of a rate hike in December are “high.” She noted that all committee members agree that additional rate increases are likely, though the timing remains uncertain and will depend on the economic outlook and inflation developments. Markets are currently pricing in a 77% probability of a hike at the central bank’s final meeting of the year. Meanwhile, data showed business confidence rose slightly in October, with all indicators of future activity turning positive despite fluctuations in oil prices.