Kiwi Dips In Response To Expected RBNZ Hike

The kiwi dollar went offered across the board as participants parsed the RBNZ's latest monetary policy decision. The Reserve Bank raised the OCR by 50bp, in a widely expected move. The key policy rate now sits above the mean estimate of its neutral level provided by the RBNZ.

• The Committee said it remains comfortable with the OCR track included in May MPS, which sees the rate peaking around 4%. This may have left some hawks disappointed, although many sell-side desks have been questioning whether the RBNZ will go that high.
• There was also marginally greater recognition of downside risks to the growth outlook, while the Committee flagged the need to monitor the reaction of households and businesses to tightening monetary conditions. Some may have interpreted these musings as constraining the room for hawkish surprises further down the line.
• Still, above comments are somewhat speculative in nature, with the MPC still looking to raise the key interest rate "briskly" until it is confident that price pressures have been brought under control.
• NZD/USD dropped to $0.6106 but is now trimming losses to last trades at $0.6119, down 10 pips on the day. Familiar technical picture remains in play, prior trading day's extremes have remained intact.
• NZGBs are richer across the curve, with yields last seen 4.5-5.4bp lower.