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NZ Dollar Volatile as Governor Bollard's Statements Mixed

NZ Dollar Volatile as Governor Bollard's Statements Mixed

2011-07-27 21:19:00
David Liu, Technical Strategist
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The New Zealand dollar tried to look for a direction against its American counterpart after the RBNZ held its Official Cash Rate at 2.50% for the fourth straight session. Mixed commentary from the Bank’s governor Alan Bollard gave the markets no clear direction to carry the southern currency.

Commentary from Governor Alan Bollard include:

*High dollar may reduce need for more rate rises

*Little need for March cut to remain much longer

High currency is drag on economy

*NZ recovery supported by strong terms of trade, on track

NZ economy grown “more strongly” than expected

Downside risks include global financial concerns

Annual headline CPI inflation above RBNZ target

Much of current inflation gains due to higher tax

Wage, price setters to focus on core inflation

Underlying inflation is forecast to below 2.5%

Although the New Zealand dollar was volatile against the greenback immediately after the release and following the governor’s comments, the markets were relatively unchanged as traders digested the news. Despite the major commentary by Bollard, pointing to the strong NZD as reducing the need for more rate rises, Credit Suisse swaps still show an expectation for the Central Bank to raise rates by 101 basis points over the next 12 months.

NZ_Dollar_Slightly_Weaker_as_Governor_Bollard_body_Picture_5.png, NZ Dollar Volatile as Governor Bollard's Statements Mixed

NZDUSD 5 minute chart; vertical line indicates time of commentary release. Chart generated with FXCM Strategy Trader.

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