The New Zealand dollar rallied at the end of the New York trading session after the Reserve Bank of New Zealand (RBNZ) cut their Official Cash Rate (OCR) as expected by 50 basis points to 3.00 percent.
However, it was necessarily the rate decision that had the biggest impact on the currency. Instead, traders were more interested in RBNZ Governor Alan Bollard’s comments that interest rates were now at “very stimulatory” levels and that the central bank expects the “rapid easing of monetary policy to slow.” Furthermore, Bollard said that the RBNZ does not expect to see interest rates in the nation near-zero, suggesting that the end of the central bank’s rate cutting cycle is nearing. Bollard also noted that the RBNZ expected activity to trough mid-year, and then gradually pick up through the second half of 2009. Overall, the news adds to evidence that the commodity dollars are better positioned for a rebound from a fundamental perspective as growth in the New Zealand, Australian, and Canadian economies has not been hit as hard by the financial crisis when compared to nations like the US and UK.