The kiwi dropped more than 0.7% in the aftermath of the decision and was last at 0.54% lower at $0.6092, as traders sharply ramped up bets of RBNZ rate reductions later this year
Asian stocks stayed near two-year highs on Wednesday on growing bets of imminent U.S. rate cuts, while the New Zealand dollar slipped after its central bank signalled greater confidence that inflation was coming down.
The RBNZ held its cash rate steady at 5.5% on Wednesday as expected, but noted that inflation was expected to return to its target range of 1% to 3% in the second half of the year.
The kiwi dropped more than 0.7% in the aftermath of the decision and was last at 0.54% lower at $0.6092, as traders sharply ramped up bets of RBNZ rate reductions later this year.
The Aussie, meanwhile, soared 0.6% to hit an over one-year high against the New Zealand dollar, with the former underpinned by wagers that the next move in Australian rates might be up given inflation is proving stubborn.
MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.16%, but remained close to the more than two-year high reached at the start of the week.
Japan’s Nikkei gained 0.5%, while Hong Kong’s Hang Seng Index rose 0.1%.
S&P 500 futures added 0.05%, while Nasdaq futures gained 0.14%. EUROSTOXX 50 futures tacked on 0.2%.
Stocks have rallied globally on the back of growing expectations of a Fed easing cycle likely to commence in September, with Powell saying on Tuesday that the U.S. is “no longer an overheated economy”.
However, he provided little clues on how soon those rate cuts could come.
If the labour market shows signs of cooling, so long as inflation data does not move higher and stays where it is, that might be enough to still deliver some music from the Fed, according to Rob Carnell, ING’s regional head of research for Asia Pacific.
The U.S. inflation report is due on Thursday, where expectations are for core consumer prices to have held steady on a monthly basis in June.
