NZD/USD drops 75 pips to lowest since Nov. 1 after RBNZ rate cut

• RBNZ cut rates by 25 basis points, sending NZD/USD down to its lowest level since Nov. 1.
• With the rate cut, New Zealand’s 10-year bond yield has hit the lowest since Apr. 1.

The NZD/USD pair is feeling the pull of gravity, courtesy of the Reserve Bank of New Zealand’s (RBNZ) decision to cut rates by 25 basis points to a new record low of 1.5%.

The pair is currently trading at 0.6566, having dropped 75 pips to hit a session low of 0.6525  –  the lowest level since Nov. 1 – immediately after the rate decision.

It is worth noting that while most analysts had anticipated a rate cut, the probability as per the overnight index swap market was just 30%.

The kiwi, therefore, could remain under pressure during the day ahead – more so, as New Zealand’s government bond yields have dropped following the rate decision.

As of writing, the benchmark 10-year yield is currently trading at 1.843%, down nearly five basis points on the day and at the lowest level since April 1. Meanwhile, the two-year yield, which is more sensitive to interest rate expectations, has slipped by more than four basis points to 1.4%.

The RBNZ’s decision to cut rates comes a day after the Reserve Bank of Australia held rates unchanged at 1.5%, defying expectations of a rate cut.  

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