The New Zealand dollar eased to around $0.569 but held close to a two-week high as markets awaited the Reserve Bank of New Zealand’s upcoming policy decision. The central bank is widely expected to raise the official cash rate by 25 basis points to 2.50% later this week, in what would be its first increase in more than three years. The move comes as inflationary pressures remain elevated, even though oil prices have retreated toward pre-war levels.
Investors will scrutinize the accompanying policy statement for guidance on the likely pace of further tightening, with most economists expecting one additional hike to 2.75% by September. The decision follows a closely contested meeting in May, when the RBNZ opted to leave rates unchanged after a split among policymakers forced Governor Anna Breman to cast the deciding vote.
The kiwi also drew support from a weaker US dollar, as softer-than-expected US employment data dampened expectations of an imminent interest rate increase by the Federal Reserve.
