The New Zealand dollar rose from an 11-month low in the wake of yesterday's monetary policy review where the Reserve Bank kept its projection for interest rates to be unchanged until late 2019.
The kiwi rose to 68.55 cents as at 8am in Wellington from as low as 68.19 cents overnight and from 68.34 cents late yesterday. The trade-weighted index was at 74.84 from 74.74 yesterday, below the RBNZ's latest projected average for the TWI in the June quarter of 76.
Reserve Bank governor Graeme Wheeler yesterday kept the official cash rate at 1.75 per cent and kept the projected track unchanged from its February statement, surprising some in the market who had been expecting the bank to adopt a mild tightening bias after a spike in oil and food prices pushed inflation above forecast in the first three months of the year.
Wheeler defended the neutral stance, saying the bank hasn't seen significant wage pressures and that growth was slower than expected through the latter half of last year, meaning there were fewer capacity constraints than anticipated.
"Right now, it seems quite clear that the RBNZ has far more confidence to deal with an inflation overshoot than the opposite, especially at a time when policy is already being tightened through the banking sector," ANZ Bank New Zealand economist Phil Borkin said in a note.
