- Easing of coronavirus restrictions might boost the NZD.
- NZD/JPY nine-day rally may extend beyond the critical trend resistance ahead.
- Bearish divergence in NZD/USD.
Reserve Bank of New Zealand Governor Adrian Orr’s dovish statements didn’t affect the NZD bullishness as it posted fresh highs against the US dollar on September 2. RBNZ governor indicated that the central bank is actively preparing a package of additional monetary policy tools to use if required.
The surprising strength in the NZD, which has now recouped its recent setbacks against all major currencies, probably might have found a trigger in the omission of foreign exchange intervention in the list of tools listed by Orr to revive the economy. The official has included negative wholesale interest rates, further quantitative easing, direct lending to banks, and ongoing forward guidance on monetary policy.
Nevertheless, it should be noted that the RBNZ has revealed not to stop short of anything to support the local economic recovery. Its governor said that the bank has managed to get overall interest rates in the country low, but has to push down further and keep it low until the economy achieves the goals around inflation and employment.
The country’s unemployment is slated to touch 8.1 Percent by the year-end, and the inflation will be a lowly 0.4 Percent in 2021 first quarter, according to the central bank figures. Such a challenging economic situation almost guarantees the deployment of the planned stimulus measures.
The RBNZ might restraint itself from using the tools if the administration is successful in containing the coronavirus early and minimize the pandemic’s economic impact.
COVID Ease Restriction Lift Up the Mood
The decision to ease restrictions in Auckland, New Zealand’s largest city, by the Prime Minister and also her statement that the testing shows very little likelihood of the presence of COVID in other parts of the country, could lift the NZD in the short-term.
The PM also showed caution and stopped short of allowing restriction-free living in the country, saying that the reopening of Auckland shouldn’t end up exposing the entire country to the pandemic.
