The New Zealand dollar fell in Asian trade on Wednesday against a basket of major rivals, extending losses for the second straight session against the US dollar under pressure from the widening interest rate gap between the US and New Zealand.
The Reserve Bank of Australia cut interest rates to three-year lows and warned against the impact of US tariffs, and hinted at a slightly deeper than expected policy easing cycle.
The Price
The NZD/USD price fell 0.4% today to $0.5924, with a session-high at $0.5968.
The New Zealand dollar closed down 0.9% on Tuesday against the dollar on profit-taking away from a six-month peak at 60.32 cents.
The kiwi was also hurt after strong US consumer confidence data for May.
RBNZ
The Reserve Bank of New Zealand cut interest rates by 25 basis points to 3.25% to April 2022 lows, the sixth such rate cut in a row, and matching expectations.
It wasn’t a unanimous vote, with a single member out of five voting in favor of maintaining rates unchanged.
The central bank cut interest rates by 225 basis points since August 2024 as lower inflation gave policymakers leeway to ease monetary policies to face the impact of US tariffs head on.
The RBNZ said inflation remains within target range, and the bank is in a good position to respond to local and international developments and maintain stable prices in the medium term.
The bank warned that increasing uncertainty about global policies will negatively impact business investments and consumption in New Zealand.
The bank expects interest rates to reach 2.92% in the fourth quarter of 2025, and 2.85% in the first quarter of 2026.
New Zealand Rates
Following the central bank’s meeting, the odds of a 0.25% RBNZ rate cut in July fell below 50%.
Interest rate futures estimates final New Zealand rates at 3% by the end of the year, up from 2.75% in previous forecasts.
Rate Gap
The current US-New Zealand interest rate gap stands at 125 basis points, favoring the greenback against its New Zealand counterpart.
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