The NZD/JPY currency pair settled below Friday’s high of 95.41, its strongest level since July 17th 2024, 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, soft Tokyo inflation weighed on the Yen.
Tokyo’s Consumer Price Index excluding Fresh Food, a gauge closely monitored by the Bank of Japan, rose 1.3% year-on-year, undershooting both expectations and the previous reading of 1.5% YoY.
The measure has now remained below the BoJ’s 2% target for a fourth consecutive month, with fuel and education subsidies helping to counterbalance upward pressure from higher raw material costs linked to the US-Israeli war on Iran.
Against this backdrop, Japan’s Finance Minister Satsuki Katayama warned that authorities could step into the foreign exchange market if needed to curb excessive volatility in the Yen.
The minor Forex pair gained 2.17% for the week.
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