The New Zealand dollar declined 1% to $0.5834, nearing a session low, after the Reserve Bank of New Zealand raised its Official Cash Rate by 25 basis points to 2.75% on Wednesday.
The increase was fully anticipated by markets, but the RBNZ’s accompanying forward guidance struck a more cautious tone than expected. The central bank trimmed its fourth-quarter average OCR forecast and stressed that the future rate path was not pre-determined, citing spare capacity, soft growth and two-sided risks that reduce the urgency for further rapid tightening.
Core inflation, excluding vehicle fuels, held at 2.9%, remaining within the bank’s 1–3% target band. Despite the hike, the kiwi’s decline reflected traders’ reassessment of the RBNZ’s policy trajectory, with the currency retreating from a 52-week high of $0.6094.
The broader U.S. dollar strengthened to a two-week high, supported by safe-haven demand and a surge in oil prices following escalating U.S.–Iran tensions. These developments reinforced expectations of a Federal Reserve rate hike in September, amplifying pressure on risk assets. Asian equity markets fell across the board amid a global risk-off shift, a bond market selloff and a sharp rise in energy prices.
