NZD/USD drops 75 pips to lowest since Nov. 1 after RBNZ rate cut

RBNZ cut rates by 25 basis points, sending NZD/USD down to its lowest level since Nov. 1.
With the rate cut, New Zealand's 10-year bond yield has hit the lowest since Apr. 1.

Omkar Godbole FXStreet Contributor

The NZD/USD pair is feeling the pull of gravity, courtesy of the Reserve Bank of New Zealand's (RBNZ) decision to cut rates by 25 basis points to a new record low of 1.5%.

The pair is currently trading at 0.6566, having dropped 75 pips to hit a session low of 0.6525 – the lowest level since Nov. 1 – immediately after the rate decision.

It is worth noting that while most analysts had anticipated a rate cut, the probability as per the overnight index swap market was just 30%.

The kiwi, therefore, could remain under pressure during the day ahead – more so, as New Zealand's government bond yields have dropped following the rate decision.

As of writing, the benchmark 10-year yield is currently trading at 1.843%, down nearly five basis points on the day and at the lowest level since April 1. Meanwhile, the two-year yield, which is more sensitive to interest rate expectations, has slipped by more than four basis points to 1.4%.

The RBNZ's decision to cut rates comes a day after the Reserve Bank of Australia held rates unchanged at 1.5%, defying expectations of a rate cut.

Pivot points

1. R3 0.667
2. R2 0.6651
3. R1 0.6625
PP 0.6606
1. S1 0.658
2. S2 0.6561
3. S3 0.6535

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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