RBNZ's Hawkish Determination Boosts Kiwi But Risk Aversion Limits Gains

New Zealand dollar appreciated as the RBNZ raised its key policy rate by the expected 50bp and reaffirmed its hawkish credentials via another strong-worded statement. The tone of today's interim monetary policy review disappointed those who had expected the RBNZ to signal imminent slowdown in the pace of its rate hikes, after the RBA delivered a smaller-than-expected 25bp rate hike the day before.

• The RBNZ echoed most of it rhetoric from the August statement when it comes to the main policy objectives, while for the first time making an explicit mention of a debate on raising interest rates by 75bp. Comments on FX dynamics intimated greater sense of concern with the weakening exchange rate and its impact on imported inflation.
• Renewed risk aversion prompted NZD/USD to gradually erase its post-RBNZ gains but the kiwi dollar outperformed on other crosses. AUD/NZD probed the water below NZ$1.1300 before settling just above that level amid a limited round trip in AU/NZ 2-year swap spread.
• Cautious mood supported safe-haven currencies at the expense of most G10 high-betas as e-mini futures faltered after a two-day rally in U.S. equity benchmarks.
• Sterling resumed losses after cable recovered to its pre-mini budget levels, as jitters resurfaced ahead of PM Truss' address to the Tory party conference today.
• Financial markets in mainland China and India were closed for local public holidays.
• U.S. ADP employment change, trade balance, as well as a suite of Services PMI readings from across the globe will take focus after Asia hours. Fed's Bostic & Kashkari are set to speak.