RBNZ To Tighten Mortgage Lending Standards As Housing Boom Continues

NZD/USD struggled for a clear direction Monday, as the rate managed to recoup initial losses linked to below-forecast Chinese PMI data and swung to a gain, but then lost shine in U.S. hours as the greenback regained poise, finishing on the back foot.

• The Finance Ministry and the RBNZ agreed to step up their efforts to reign in housing prices and strengthen the protection of financial stability. In the updated Memorandum of Understanding on macroprudential policy, the RBNZ's toolbox has been expanded to include debt serviceability restrictions (DTI), albeit the Reserve Bank has been instructed to avoid negative impact of any such restrictions on first home buyers. The clause re: first home buyers is a result of a compromise between FinMin Robertson and the RBNZ. The Reserve Bank will launch consultations on Debt to Income (DTI restrictions) and interest rate floors in October, when they are also looking to tighten LVR rules by limiting the amount of permitted high LVR lending. The news came just ahead of the release of New Zealand's CoreLogic House Price Index, which will shed some light on the condition of domestic housing market.
• The main point of note on the local docket this week is the quarterly labour market report, due for release tomorrow. The jobs data may prove critical for the next RBNZ Monetary Policy Statement, due in just above two weeks.
• NZD/USD has crept higher this morning and last sits +8 pips at $0.6979. Bulls look for a jump above Jul 30 high of $0.7021, before targeting Jul 15 high of $0.7045. Conversely, a slide through Jul 28 low of $0.6902 would bring Jul 20 low of $0.6881 into play.