The NZD/USD pair has extended its gains for the third consecutive session, trading around 0.6340 during the Asian hours on Wednesday. Earlier in the day, the pair reached a nine-month high of 0.6355. The upward movement of the New Zealand Dollar (NZD) can be attributed to an optimistic outlook for foreign currency inflows, fueled by new monetary stimulus measures from China, New Zealand’s largest export partner.
On Tuesday, Pan Gongsheng, the Governor of the People’s Bank of China (PBOC), announced a 50 basis point reduction in the reserve requirement ratio (RRR). He also revealed plans to lower the 7-day repo rate from 1.7% to 1.5%, and to decrease the down payment for second homes from 25% to 15%. Additionally, the PBOC cut the one-year Medium-term Lending Facility (MLF) rate from 2.30% to 2.0% on Thursday, following a previous reduction in July 2024, when the rate was lowered from 2.50%.
The NZD is also benefiting from a stronger purchasing power among Australians after a hawkish hold by the Reserve Bank of Australia (RBA) boosted the Australian Dollar (AUD). On Tuesday, the RBA maintained the Official Cash Rate (OCR) at 4.35%, with Governor Michele Bullock confirming that rates would remain on hold for the time being and clarifying that a rate hike was not under consideration during the meeting.
Meanwhile, the US Dollar (USD) is facing downward pressure due to disappointing consumer confidence data released on Tuesday. The US Consumer Confidence Index fell to 98.7 in September, down from an upwardly revised 105.6 in August, marking the largest decline since August 2021.
In comments made on Tuesday, Federal Reserve Governor Michelle Bowman emphasized that key inflation indicators remain “uncomfortably above” the 2% target, advising caution as the Fed contemplates future interest rate cuts. Despite this, she expressed a preference for a more measured approach, advocating for a quarter percentage point reduction in the near future.
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