Sean Callow, analyst at Westpac, suggests that the kiwi was the key beneficiary of the scramble to price in dovish turns by central banks around the world, which has stalled a little this week and was easily the strongest G10 currency over the week.
“The RBNZ did actually deliver a more dovish outlook than in Nov, returning to the line that “direction of our next OCR move could be up or down.” This was broadly as we expected.”
“But the RBNZ’s interest rate projections still tilt higher, albeit only from 2021, while it played down the rise in the unemployment rate in Q4. Its 0.8%qtr GDP forecast for Q4 also looks optimistic, but that release is not until 21 March. The scale of the kiwi rally looks excessive but near term reversal seems unlikely.”
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