Kiwi Dollar Extends Rebound as Markets Reassess RBNZ

Key Moments

NZD Supported by Hawkish RBNZ Guidance

The New Zealand Dollar advanced further against the US Dollar during European trading on Friday, with NZD/USD moving toward 0.5640. The pair has been recovering after sharp volatility on Wednesday that followed the Reserve Bank of New Zealand’s decision to keep the Official Cash Rate unchanged at 2.75%.

Market participants had anticipated an increase to 3%, but the RBNZ opted to hold rates steady. The central bank indicated that the decision represented a temporary pause, while emphasizing that it remains committed to a tightening stance due to persistent upside risks to inflation.

Commerzbank: Pause Does Not Mark Policy Reversal

Strategists at Commerzbank described the RBNZ’s decision as a short break in the tightening cycle rather than a shift toward easing. They argued that the latest move should be interpreted as “more of a pause than a dovish pivot,” signaling that the bank is not beginning a rate-cutting phase.

Commerzbank analysts stated that they “continue to expect two further hikes, in December and 1Q27,” and said this anticipated policy trajectory “should limit further NZD downside” even after the currency’s recent softness.

US Dollar Firms Ahead of Mid-Term Elections

While the New Zealand Dollar staged a rebound, the US Dollar also found support as investors turned cautious in the run-up to the United States mid-term elections next week. The US Dollar Index (DXY), which tracks the performance of the Greenback against six major peers, was last seen trading almost unchanged around 101.84, having recovered its earlier intraday declines.

Expectations for Divided Government in Washington

Commerzbank analysts suggested that the US political backdrop is moving toward “what is known as a ‘divided government’,” with a likely split outcome between the White House and Congress. They highlighted that in areas important to President Trump, “such as foreign and trade policy, he has in any case relied primarily on executive orders recently,” implying that much of his policy agenda could continue even if legislative initiatives face greater obstacles.

NZD/USD Technical Setup

From a technical perspective, NZD/USD was last trading at 0.5637 on the daily chart, maintaining a bearish short-term profile while remaining below the 20-day Exponential Moving Average (EMA) at 0.5658. The pair has so far failed to break above this near-term trend gauge, indicating that the current rebound is still occurring within a broader downward phase.

The Relative Strength Index stands at 43.4, still under the midline, pointing to only limited recovery strength. On the upside, the 20-day EMA around 0.5658 acts as initial resistance and is expected to attract selling interest aligned with the prevailing downtrend. On the downside, key support is identified at the October 28 low of 0.5584.