New Zealand dollar plummeted against its US peer on Tuesday, following comments made by the Reserve Bank of New Zealand (RBNZ), while market players awaited the release of the minutes of Federal Reserves July meeting.
NZD/USD reached a session low at 0.7958 at 6:47 GMT, the lowest point since August 14th, after which consolidation followed at 0.7965, down by 1.20% for the day. Support was likely to be found at August 7th low, 0.7884, while resistance was to be met at current session high, 0.8077.
The kiwi dollar came under pressure, after today it became clear that RBNZ is going to impose restrictions to home lending in order to protect countrys financial system against a possible home price bubble, as homes in New Zealand have become the fourth most overvalued worldwide. In addition, RBNZ Governor Graeme Wheeler said that the national currency was overvalued and an interest rate raise might be needed during the next year.
Another report showed that RBNZ inflation expectations for Q3 increased to 2.4% from 2.1% during the preceding quarter. This survey encompasses a large number of managers and is usually conducted in the middle of the month by ACNeilson for the central bank. Expectations, regarding monetary conditions, consumer prices, interest rates, the exchange rate and the gross domestic product in the country are included.
In the mean time, market participants awaited the release of the minutes of Federal Reserve Bank’s July meeting, scheduled on Wednesday, as it may provide clues on when the central bank may begin tapering its stimulus program. Policymakers will probably begin to pare back the central bank’s bond-buying program in September. These expectations were strengthened after on August 15th a report said that the weekly initial jobless claims in the United States decreased in number to their lowest in almost six years.
Elsewhere, the kiwi dollar was losing ground against the Aussie, with AUD/NZD cross advancing 0.39% to trade at 1.1343 at 7:55 GMT.
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