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New Zealand Dollar: Will Higher Rate Expectations Lead to a Break Out?

New Zealand Dollar: Will Higher Rate Expectations Lead to a Break Out?

2010-03-26 21:47:00
David Song, Currency Strategist

Meanwhile, Reserve Bank of New Zealand Deputy Governor Grant Spencer said new liquidity rules will ultimately limit the scope for future rate hikes as the “Core Funding Ratio will act to push up the cost of funds and moderate the credit cycle, thus tending to reinforce the effect of monetary policy adjustments,” and went onto say that the central bank’s outlook for future policy remains unchanged during a speech in Hong Kong. As the kiwi-dollar maintains the downward trend from the 2009 high (0.7634), the pair may continue to test the lower bounds of its recent range going into the following month as the RBNZ maintains a cautious outlook for the region. Indeed, the light New Zealand economic calendar for the following week will certainly set the stage for risk sentiment to dictate price action for the kiwi-dollar, but a rise in building permits paired with an enhanced business confidence survey could drive the NZD/USD higher as the economic recovery gathers momentum. - DS

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