The relatively positive trend of the New Zealand dollar, which has been tracked for several weeks, ended in a huge failure. The currency of a cozy island nation collapsed after a meeting of the Reserve Bank of New Zealand (RBNZ).
According to a statement by Adrian Orr, head of the RBNZ, the regulator decided to keep the interest rate at a near-zero level until March 2021. The catalyst for this decision was government measures taken to minimize the negative consequences of the COVID-19 pandemic. The actions of the New Zealand authorities aimed at fighting the coronavirus have led to a reduction in the national economy. In this regard, the RBNZ had to resort to "heavy artillery".
The current situation has extremely negatively affected the dynamics of the New Zealand dollar. This was facilitated not only by the current aggressive steps of the Reserve Bank of the country, but also by the possible transition of the regulator to negative rates. According to ANZ Bank economists, negative rates could cause disaster in the New Zealand economy, and its further stabilization will be called into question.
According to analysts, the authorities of the island state are making incredible efforts to lessen the effects of the lockdown, which turned out to be one of the toughest in the world. Current tensions reduce the chances of the NZD/USD pair not only for further growth, but also for moderate recovery. In the middle of the trading week, the pair came under a serious fundamental press, and because of which, the Kiwi had to retreat to the level of 0.6000. Moreover, the loss of the "New Zealander" reached 0.88% yesterday. By the end of yesterday, the New Zealand dollar underwent a total sale after a meeting of the RBNZ. As a result, on Thursday, May 14, the NZD/USD pair finally moved into the category of outsiders, ending up in the low range of 0.5988 - 0.5990.
An additional factor in the decline of the New Zealand dollar was the increase in purchases of government bonds by the RBNZ. It is expected to increase from 30 billion to 60 billion New Zealand dollars. The revitalization of the quantitative easing program (QE) by the regulator triggered the current economic tsunami. According to experts, the upcoming doubling of purchases of state bonds was the final mishap that brought down NZD.
Experts fear that under the burden of the negative consequences of the pandemic, the Kiwi will fall even more, captivating New Zealand's economy. According to analysts, the process of its restoration may take several years and require unprecedented measures of financial support. Experts believe that the introduction of negative rates will slow down economic growth in the country, although it can help restore it in the short-term. Meanwhile, in the medium-term, the currency of New Zealand is expected to fluctuate in volatility. According to analysts, periods of relative stability NZD will alternate with moments of moderate decline.
