Having soared on Monday, the NZD extended its gains even further on Tuesday before finding the air a little thin after its rapid ascent.
Its’ best levels against the currencies we follow closely here were NZD/USD0.6944, NZD/EUR0.5841, AUD/NZD1.0964, NZD/CAD0.8881 and GBP/NZD1.9118 and it opens in London down from all these points. NZD/USD is at 0.6908 having at one point overnight touched 0.6882 but the biggest reversal has of course come against the British Pound with GBP/NZD up almost 4 cents from yesterday’s low at 1.9400 this morning.
In presenting its own Financial Stability Review, the RBNZ said it will ease some of the so-called ‘macro-prudential’ regulations it had imposed on mortgage lending in an attempt to cool the residential property market without raising interest rates.
Governor Grant Spencer said in the past six months, pressures on the housing market had continued to moderate due to further tightening of LVRs, a firming of bank lending and an increase in mortgage rates. “These policies have helped improve banking system resilience by substantially reducing the share of high-LVR loans." Currently no more than 10% of loans can go to owner occupiers with a deposit of less than 20%. This cap will rise to 15%.
There’s not much of a read-across to monetary policy from these measures, though some might argue that if macroprudential policies were introduced instead of raising interest rates, easing them might open the door a tiny bit to a rate hike. This doesn’t seem a persuasive argument, however. The AUD/NZD cross is back below 1.10 mostly due to weakness in the AUD, not because of NZD rate hike concerns.