AUD/NZD falls to 1.2020 as RBNZ signals earlier and larger rate hikes to curb inflation, boosting NZD demand.
AUD/NZD extended its decline for a third consecutive session, trading near 1.2020 in Asian hours on Friday. The cross weakened as the Reserve Bank of New Zealand’s hawkish stance strengthened the New Zealand Dollar, with Governor Anna Breman indicating interest rates may rise sooner and more aggressively than previously expected to tackle persistent inflation.
The RBNZ held its Official Cash Rate at 2.25% during its May meeting but revealed a split decision, with three board members favoring an immediate 25-basis-point hike. Domestic confidence data also supported the NZD, as the ANZ-Roy Morgan Consumer Confidence Index rose to 86.5 in May from April’s 80.3, though it remains 21 points below its January peak.
Meanwhile, the Australian Dollar faced headwinds as markets scaled back expectations for further Reserve Bank of Australia rate hikes. The divergence in monetary policy outlooks between the two central banks weighed on AUD/NZD, amplifying the cross’s downward pressure.