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Kiwi Knee-Jerks Higher After Double-Barrel OCR Hike, Yen Sell-Off Continues

FOREX

Post-RBNZ demand for the kiwi dollar quickly dissipated as the details of monetary policy review came under scrutiny. NZD crosses jumped in the initial reaction as the Reserve Bank raised the OCR by 50bp in the first half-point hike since 2000 citing concerns about mounting inflationary pressures. The upswing got unwound as the minutes suggested that the RBNZ has front-loaded policy tightening without necessarily seeing a higher terminal rate. Policymakers noted that they delivered a larger hike "now, rather than later" as a result of least regrets analysis. The kiwi is the worst G10 performer as we type.

  • USD/JPY continued its unrelenting bull run, albeit without re-testing the Y125.76/77 cycle highs printed earlier this week. FinMin Suzuki reiterated that rapid FX moves are "undesirable" but the yen ignored his comments.
  • The BoC is set to deliver its monetary policy decision, with most looking for a 25bp rate hike. It will come alongside the Bank's Quarterly Monetary Policy Report. The loonie caught a light bid amid positioning ahead of the policy announcement.
  • Elsewhere, BoJ's Kuroda is due to speak today, while key data releases include UK inflation figures & China's trade balance.
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