The New Zealand dollar fell broadly on Wednesday against a basket of major and minor currencies, extending its losses for a second consecutive session against the US dollar and hitting a six-month low amid heavy selling pressure following a dovish Reserve Bank of New Zealand (RBNZ) meeting.
Defying market expectations, the RBNZ cut interest rates by 50 basis points to their lowest level in three years and signaled further monetary easing to support the struggling economy.
As a result, traders increased their bets on another rate cut in November, anticipating additional stimulus to bolster demand and shield the economy from mounting global challenges.
Price Overview
• NZD/USD: The New Zealand dollar declined about 1.05% to 0.5739 — its weakest level since April — from an opening of 0.5800, after hitting a session high of 0.5802.
• On Tuesday, the kiwi closed down roughly 0.75% against the greenback, its first daily loss in eight sessions, as traders took profits after reaching a two-week high near 0.5845.
Reserve Bank of New Zealand
The RBNZ cut the official cash rate by 50 basis points to 2.50% — its lowest level since July 2022 — exceeding forecasts of a 25-point cut. This marks the eighth rate reduction since the central bank began its monetary-easing cycle in August 2024.
The central bank has now lowered rates by a total of 300 basis points since August 2024, as inflation continues to cool toward the 2–3% medium-term target range and economic activity and labor markets remain weak.
“The Monetary Policy Committee reached a consensus to reduce the official cash rate by 50 basis points to 2.5%,” the RBNZ said. “The Committee remains open to further reductions in the official cash rate as needed to ensure inflation stabilizes sustainably near the 2% midpoint of the target range over the medium term.”
Wednesday’s meeting was the second-to-last under Governor Christian Hawkesby, who will be succeeded by Swedish policymaker Anna Breman on December 1.
This dovish stance offers some political relief to Prime Minister Christopher Luxon, whose government has suffered sharp declines in popularity amid a faltering economic recovery that failed to materialize as promised during last year’s election campaign.
Interest Rate Outlook
• Following the RBNZ decision, market pricing for another 25-basis-point cut at the November 26 meeting surged above 95%.
• Futures now indicate the policy rate could fall to around 2.0% by the end of the year.
Market Commentary
Nick Tuffley, chief economist at ASB Bank, wrote: “The RBNZ’s decision suggests that the risk of weaker inflation pressures than previously expected has outweighed the need to wait and see how quickly the economy recovers — or whether there are any side effects from the recent rise in inflation.”
Joseph Capurso, head of international and FX research at Commonwealth Bank of Australia, who had predicted a 50-point cut, said: “Markets had only priced in about a 30% chance of a 50-basis-point move today. A fall in the New Zealand dollar was inevitable after such a surprise.”
