The AUD/NZD currency pair settled above Friday’s low of 1.1990, its weakest level since March 31st, as the New Zealand Dollar was supported by expectations that the Reserve Bank of New Zealand will pursue an ultra-hawkish monetary policy stance to curb inflation.
RBNZ Governor Anna Breman indicated that policy rates were likely to rise sooner and by more than previously signaled in order to fight inflation.
“The committee remains focused on ensuring inflation returns to target while avoiding unnecessary volatility in the economy,” Breman stated.
This marked the second occasion in the week that Breman underscored the need for tighter monetary conditions to moderate inflation.
“Committee sees inflationary pressures going forward, agrees cash rate needs to be higher going forward,” Breman said on Wednesday after the central bank opted to keep the official cash rate unchanged at 2.25%.
At the same time, market participants scaled back expectations of additional interest rate hikes by the Reserve Bank of Australia.
Disappointing Australian labor market figures for April, combined with consumer inflation data that came in below expectations on Wednesday, prompted traders to pare back the likelihood of a rate move at the RBA’s June meeting.
This reassessment has undermined demand for the Australian Dollar.
The minor Forex pair lost 1.38% for the week.
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