Risk Aversion Pulls Rug From Under Kiwi After Post-RBNZ Rally

The kiwi dollar outperformed in G10 FX space Wednesday after receiving a boost from a hawkish RBNZ Monetary Policy Statement, even as lingering Russia/Ukraine worry sapped some of its initial strength. The Reserve Bank raised the OCR by 25bp in a "finely balanced" decision between the chosen course of action and a 50bp hike, while forecasting a more aggressive tightening path.

• Governor Orr appeared before lawmakers today, defending the central bank's decision to deliver unprecedented amounts of stimulus amidst the pandemic of Covid-19, as opposition MPs suggested that the MPC's policy decisions poured too much fuel on inflation.
• Health Min Hipkins confirmed that New Zealand is moving to phase 3 of Omicron response at midnight tonight. The official noted that "now is the time to implement the next stage in our plan that will keep New Zealand going throughout the Omicron peak."
• A degree of risk aversion weighs on the kiwi dollar this morning amid renewed concerns that a Russian invasion on Ukraine might be imminent. NZD/USD last changes hands at $0.6761, down 11 pips on the day.
• From a technical perspective, bears look for losses past Feb 14/4 lows of $0.6593/90 towards Jan 28 low of $0.6530. Conversely, bulls would be pleased by a rally above Jan 19 high of $0.6812, which would expose Jan 13 high of $0.6891.
• On the data front, focus turns to New Zealand's retail sales & trade balance, due for release Friday.