The New Zealand dollar rallied in Asian trade on Wednesday, resuming gains against its US counterpart and scaling a fresh two-month high after the policy meeting by the Reserve Bank of New Zealand, which was more bullish than expected.

As expected, the RBNZ maintained interest rates unchanged at 15 year highs, while holding onto its strict stance and language, asserting the need for maintaining tight policies until medium-term inflation targets are achieved.

The Price

The NZD/USD pair rose 1% today to 0.6153, the highest since March 14, with a session-low at 0.6091.

The pair fell 0.25% on Tuesday, the second loss in a row as a short-term correction.

The kiwi rallied 1.9% last week against its US counterpart, the fourth weekly profit in a row, and the largest since November as global risk appetite improved.

The RBNZ

As expected, the Reserve Bank of New Zealand maintained interest rates at 5.5%, the highest since October 2008.

It said in its policy statement that concerns persist that inflation could be more resistant than expected, which would require maintaining strict policies for an extended duration.

RBNZs Forecasts

The RBNZ expects inflation at 3% in the third quarter of 2024.

It expects interest rates to average 5.65% in the fourth quarter of 2024, and 5.4% in the third quarter of 2025.

It means the bank expects potential interest rate cuts starting late 2025.

Adrian Orr

RBNZ Governor Adrian Orr said hes confident that inflation will return to target range eventually, however he expects itll take even more effort, opening the door for another interest rate hike.

New Zealand Rates

New Zealand has the highest interest rate set by any G8 central bank, thus underpinning the New Zealand dollar against main rivals for the upcoming months.