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Forex pairs in this Article » NZD/USD
Talking Points:

  • Wheeler warns that a cash rate hike may be needed to slow rising house prices
  • RBNZ already predicting 2 percentage points of rate increases
  • NZD/USD rallies above 0.8300
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The New Zealand Dollar jumped 40 pips against the US Dollar on hawkish comments from Risk Bank of New Zealand Governor Wheeler.

Wheeler said that larger than expected cash rate hike might be required to slow the rise of house price inflation. The RBNZ already expects to raise the official cash rate by 2 percentage points from 2014 to the beginning of 2016, according to the article posted in Wheeler’s name on the central bank’s website. Meanwhile, the RBNZ will apply loan-to-value restrictions to mortgages to slow housing prices, but the central bank will turn to a cash rate increase should those restrictions fail.

The RBNZ said last month that a rate increase will likely be required in 2014, as the economy and inflation pickup. The cash rate has been kept at 2.5% since March 2011. The article today specifically spelled out inflation worries, as the central bank expects the rate to be reported just 0.1% less than its 2% target in 2014.

The Kiwi continues to trade above 0.8300 at the time of this writing, and resistance may next come in by a four month high recently set at 0.8435. The 200-day simple moving average may provide support at 0.8178.

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NZD/USD Daily: October 2, 2013

RBNZ_Wheeler_Says_Rate_Increase_May_Slow_Inflated_House_Prices_Kiwi_Rallies_body_Picture_1.png, RBNZ Wheeler Says Rate Increase May Slow Inflated House Prices, Kiwi RalliesChart created by Benjamin Spier using Marketscope 2.0

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to bbspier@fxcm.com .

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