New Zealand Dollar May Firm On Rising Yield Expectations
RBNZ Governor Bollard said the country's economy had entered a "less fragile stage" when leaving rates on hold at 2.5 % last week. The central bank said it expected "to begin removing policy stimulus over the coming months, provided the economy continues to evolve as projected". Mr. Bollard expanded on the statements yesterday saying "financial markets currently expect the Reserve Bank to begin raising the official cash rate around the middle of the year and continue to do this in small steps for some time. This is broadly in line with our current views." Overnight index swaps are now pricing in 197 bps of tightening over the next twelve months which is slightly lower than the peak of 215 following the employment report. Nevertheless, markets expect the central bank to begun aggressively raising rates which should provide “kiwi” support.
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.