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The NZD/USD pair strengthened during the Asian session and briefly raised back above 0.7250 as policy developments in New Zealand attracted market attention after the Reserve Bank of New Zealand (RBNZ) tightened macro-prudential policy in an attempt to dampen building risks in the domestic housing market, per MUFG Bank. 

Key quotes

“The RBNZ has stated that it will reinstate mortgage lending restrictions on March 1 and tighten them further for investors from May 1. The re-introduced lending restrictions mean that most owner-occupiers will need a 20% deposit to get a mortgage, while investors will need 30%. From May 1, the required down-payment for investors will rise to 40%.” 

“The building risks to financial stability from the housing market have been one of the negative side effects of running loose monetary policy to support growth. As a first step, the RBNZ and government are focusing on macro-prudential measures to dampen risks posed by the housing market. However, the developments will also encourage some speculation that the RBNZ may eventually need to tighten monetary policy sooner as well.” 

“The kiwi is already benefitting from the scaling back of expectations for further RBNZ rate cuts as the economic recovery in New Zealand has proven stronger than expected.”