RBNZ Preview: Ending NZD/USD's recovery attempt? Dovish stance on QE and coronavirus may weigh

  • The Reserve Bank of New Zealand is set to leave interest rates unchanged at its August meeting. 
  • COVID-19's comeback in the country may trigger a dovish stance. 
  • Hints about the bond-buying scheme or negative rates may weigh on the kiwi.

Over 100 days without any coronavirus case have come to an end – and the central bank is set to take note. Four new coronavirus cases broke New Zealand's successful streak of depressing the disease and have resulted in new restrictions, especially in Auckland. 

Apart from the economic fallout from new lockdown measures, the Reserve Bank of New Zealand may also take a page from its peers across the Tasman Sea. The Reserve Bank of Australia recently boosted its bond-buying scheme amid the rise in COVID-19 cases in Melbourne. 

New Zealand's economic situation remains relatively upbeat, with depressed unemployment, remaining at 4% in the second quarter of 2020:

Growing concerns, policy options, forecasts

Nevertheless, the ongoing global crisis and potential hardship from the country's ongoing isolation may prompt preemptive steps. Adrian Orr, Governor of the Reserve Bank of New Zealand, has previously opened the door to negative interest rates and even monetary financing of the government in Wellington.

If he reiterates his willingness to set sub-zero borrowing costs, the New Zealand dollar has room to the downside – despite the relatively upbeat economic performance. 

Moreover, the RBNZ's bond-buying scheme currently stands at NZ$60 billion, and there is room to expand it. Going as far as purchasing foreign bonds – unthinkable by any central bank in pre-pandemic times – would already have a detrimental impact on the kiwi, yet remains highly unlikely. 

Apart from setting rates and releasing a statement, the bank also publishes its quarterly Monetary Policy Statement – a broad report including forecasts for growth and inflation. Up-to-date estimates of growth projections could also guide the kiwi.

It is essential to note that the RBNZ's decision comes ahead of the September 19 elections and Orr would prefer to stay out of the spotlight, refraining from bombastic statements. Nevertheless, the central bank is highly respected in New Zealand, and its outlook could rock the kiwi.

The mood around the US dollar is unstable, with investors moving from optimism regarding a vaccine and US fiscal stimulus to dismay over the deadlock in Washington and worries about the Sino-American trade deal. The bias toward the safe-haven US dollar at the time of the RBNZ's decision will also have its impact on NZD/USD. 


The RBNZ is set to leave rates unchanged but hint about future policy and provide new forecasts. While recent economic performance has been upbeat, headwinds to the global economy remain prevalent, potentially triggering a dovish stance that may weigh on NZD/USD.

More NZD/USD analysis:Two scenarios likely

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis

Latest Forex Analysis

Editors’ Picks

EUR/USD holds above 1.17, shrugging off upbeat US consumer confidence

EUR/USD is trading above 1.17, holding its gains despite upbeat US data. The CB Consumer Confidence jumped to 101.8 points, beating estimates. Fed speakers are awaited and the presidential debate is eyed.


GBP/USD retreats from highs amid Brexit, coronavirus uncertainty

GBP/USD is retreating from the highs close to 1.29 as concerns about Brexit talks and rising UK coronavirus cases are taking their toll on the pound. 


XAU/USD holds steady near multi-day tops, around $1890 region

Gold built on the previous day's goodish bounce from 100-day SMA and edged higher through the first half of the trading action on Tuesday. The overnight sustained move beyond 100-hour SMA was seen as a key trigger for bullish traders and pushed the commodity to multi-day tops.

Gold News

Presidential Debate Preview: Trump may lose due to his own buildup, market implications

The first presidential debate is set to shake up the elections campaign.  President Trump's playing down of challenger Biden's skills may turn into a double-edged sword. Markets will move on implications for a new fiscal relief package. 

Read more

WTI drops to fresh lows near $39.70 ahead of API

Prices of the American benchmark for the sweet light crude oil broke below the $40.00 mark per barrel and slipped back to the $39.70 region on Tuesday.

Oil News

Forex Majors