NZ Dollar Falls As RBNZ Holds Key Rate Defying Market Expectation

(RTTNews) - The New Zealand dollar weakened against other major currencies in the Asian session on Wednesday, as the Reserve Bank of New Zealand or the RBNZ unexpected interest rate weighed on the currency.

The Reserve Bank of New Zealand unexpectedly retained its key interest rate after two consecutive rate hikes and signaled tighter policy ahead.

The Monetary Policy Committee, governed by Anna Breman voted 4-3 to hold the Official Cash Rate at 2.75 percent, defying market expectations for a 25-basis point hike.

The bank had lifted the rate by a quarter-point each in July and September.

"The Committee agreed that tighter monetary policy is likely to be required but remains conditional on the economic outlook," the bank said in a statement.

The majority of members determined that the two recent rate increases warrant additional time to assess their effects on the economy.

The New Zealand economy continues to recover, although conditions remain uneven, the MPC noted.

All members agreed on the overall outlook for inflation. However, members differed in how much weight they placed on various risks and the timing of the monetary policy response, the bank said.

In the Asian trading today, the NZ dollar fell to a 2-week low of 0.5583 against the U.S. dollar and nearly a 4-week low of 88.18 against the yen, from early highs of 0.5685 and 89.76, respectively. If the kiwi extends its downtrend, it is likely to find support around 0.54 against the greenback and 87.00 against the aussie.

Against the euro and the Australian dollar, the kiwi dropped to nearly a 2-week low of 1.9916 and nearly a 13-1/2-year low of 1.2603 from early highs of 1.9576 and 1.2374, respectively. The kiwi may test support near 2.01 against the euro and 1.27 against the aussie.

Looking ahead, U.S. EIA crude oil data is due to be released in the New York session.