The NZD/USD climbed along with the AUD/USD overnight, to sit around 0.8040 currently. The NZD’s pullback in response to the RBNZ meeting yesterday proved short-lived. Despite falls in the NZ TWI in recent weeks we were not surprised that the RBNZ continued to comment on the NZD as being ‘overvalued’. However, at 74.40 the TWI is now some way below the RBNZ’s forecast average for the year ahead, above 77.00. This is not to criticise the forecast (we maintain a similar forecast). However, it shows within the Bank’s framework, if the NZD does not rebound aggressively, it may have some leeway to respond to other pressures in the economy that may represent inflation risk further down the track. For now, the RBNZ has left its implied interest rate track virtually unchanged.
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BNZ