- NZD drops across the board as RBNZ boosts the asset purchase program.
- The central bank says negative rates and foreign QE are an option.
- AUD/NZD jumps to the highest level since October 2018.
The offered tone around the New Zealand dollar strengthened, pushing the AUD/NZD cross to fresh 22-month highs above 1.09 after the Reserve Bank of New Zealand (RBNZ) boosted the large scale asset purchase program (LSAP) by NZD 100 billion.
The markets were expecting the central bank to boost its asset purchase program to NZD 75 to 90 billion. Hence, it’s no surprise that Kiwi fell to fresh multi-month lows in a knee jerk reaction.
And while the central bank kept the official cash rate (interest rate) unchanged at 0.25%, it left the doors open for a potential cut to negative territory in the future. Policymakers agreed that package of additional monetary instruments must remain in the active preparation, the official statement said, while adding that negative rates and purchases of foreign bonds remain an option.
Looking forward, the RBNZ’s outright dovish stance is likely to keep the NZD on the defensive. The AUD/NZD cross is trading at 1.881 at press time, representing a 0.23% gain on the day, having put in a high of 1.0920 immediately following the rate decision. That was the highest level since October 2018.