New Zealand dollar holds above 59 US cents

Daily Currency Update

The Kiwi dollar is slightly weaker this morning when valued against the Greenback. The NZDUSD pair struggles to capitalize on the overnight late rebound from the 59 US cent level.  The Kiwi dollar is currently trading around 0.5910 and seems vulnerable to extending this week's slide from the 60 US cent psychological mark, the highest level since October 12, as seen on Monday. The market mood has soured on the back of a vaguely downbeat outlook for the global economy. Since New Zealand is a major exporter of commodities, a slowdown in global growth would not help its currency.

On the data front, New Zealand’s inflation rate has been slowly dropping. Inflation fell to 5.6% in the third quarter, down from 6.0% in Q4. The downward trend is certainly encouraging for the Reserve Bank of New Zealand (RBNZ) but policymakers are also concerned about inflation expectations and not just the latest inflation numbers. The fourth-quarter release was positive, as inflation expectations fell to 2.76%, down from 2.83% in Q3 and its lowest level in two years. As we saw with inflation data, the direction is downward, but slowly. The RBNZ held rates for a third straight time at the October meeting, leaving the cash rate at 5.50%. The central bank meets next on November 29th and is expected to pause again. The RBNZ is confident that inflation will fall more quickly, projecting an inflation rate of 2.7% by Q3 of 2024.