NZ Dollar Recovers Despite RBNZ Rate Cut

(RTTNews) - The New Zealand recovered from recent weakness against other major currencies in the Asian session on Wednesday, despite the Reserve Bank of New Zealand cut its interest rate by 50 basis points as inflation remained near the mid-point of the target band.

The Monetary Policy Committee of the Reserve Bank of New Zealand, led by Governor Adrian Orr, decided to lower the rate to 3.75 percent from 4.25 percent.

Policymakers observed that inflation remained near the mid-point of the 1-3 percent target band.

"If economic conditions continue to evolve as projected, the Committee has scope to lower the OCR further through 2025," the bank said.

Meanwhile, the investors remain cautious amid lingering worries of a global trade war and geopolitical issues as they tracking reports from Ukraine peace talks. A meeting between Russian and U.S. officials raised hopes of an end to the three-year war in Ukraine.

U.S. President Donald Trump has earlier in the day threatened to impose tariffs of around 25 percent on automobile, semiconductor and pharmaceutical imports, which could affect most Asian regions.

Traders cautiously awaited the Federal Open Market Committee (FOMC) meeting minutes, due later in the day, for clues on the U.S. interest rate outlook.

In the Asian trading today, the NZ dollar rose to a 2-day high of 87.03 against the yen, from a recent 1-week low of 86.17. The kiwi may test resistance around the 89.00 region.

In economic news, data from the Ministry of Finance showed that Japan posted a merchandise trade deficit of 2.758 trillion yen in January. That missed forecasts for a shortfall of 2.104 trillion yen following the 132.5 billion yen surplus in December.

Exports gained 7.2 percent on year to 7.863 trillion yen, shy of expectations for an increase of 7.9 percent following the 2.8 percent gain in the previous month.

Imports surged an annual 16.7 percent to 10.622 trillion yen versus forecasts for an increase of 9.7 percent and up from 1.7 percent a month earlier.

Data from the Cabinet Office showed that the total value of core machinery orders in Japan was down a seasonally adjusted 1.2 percent on month in December, coming in at 889.3 billion yen. That missed forecasts for an increase of 0.4 percent following the 3.4 percent gain in November.

On a yearly basis, orders rose 4.3 percent - again shy of expectations for an increase of 5.9 percent following the 10.3 percent spike in the previous month.

Against the euro and the U.S. dollar, the kiwi edged up to 1.8261 and 0.5721 from a recent 5-day lows of 1.8395 and 0.5678, respectively. If the kiwi extends its uptrend, it is likely to find resistance around 1.81 against the euro and 0.58 against the greenback.

The kiwi advanced to 1.1118 against the Australian dollar, from a recent near 3-month low of 1.1175. On the upside, 1.09 is seen as the next resistance level for the kiwi.

In economic news, data from the Australian Bureau of Statistics showed that Australia's wage price index was up 0.7 percent on quarter in the fourth quarter of 2024. That missed expectations for an increase of0.8 percent, which would have been unchanged from the previous quarter.

On a yearly basis, wages climbed 3.2 percent - matching forecasts and slowing from the 3.5 percent in the three months prior.

Looking ahead, U.K. consumer and producer prices for January are due to be released at 2:00 am Et in the pre-European session.

In the European session, the European Central Bank is scheduled to issue euro area current account data for December at 4:00 am ET. The current account surplus is forecast to rise to EUR 30.2 billion from EUR 27 billion in November.

In the New York session, U.S. MBA mortgage approvals data, U.S. building permits and housing starts, both for January and U.S. Redbook report are slated for release.

At 2:00 pm ET, the Federal Open Market Committee (FOMC) meeting minutes of its latest monetary policy meeting held on January 28-29, 2025, where the interest rates were kept unchanged at 4.25 percent to 4.5 percent.