The New Zealand dollar fell broadly on Wednesday against a basket of major and minor currencies, extending its losses for a second consecutive session against the US dollar and hitting a six-month low amid heavy selling pressure following a dovish Reserve Bank of New Zealand (RBNZ) meeting.

Defying market expectations, the RBNZ cut interest rates by 50 basis points to their lowest level in three years and signaled further monetary easing to support the struggling economy.

As a result, traders increased their bets on another rate cut in November, anticipating additional stimulus to bolster demand and shield the economy from mounting global challenges.

Price Overview

• NZD/USD: The New Zealand dollar declined about 1.05% to 0.5739 — its weakest level since April — from an opening of 0.5800, after hitting a session high of 0.5802.

• On Tuesday, the kiwi closed down roughly 0.75% against the greenback, its first daily loss in eight sessions, as traders took profits after reaching a two-week high near 0.5845.

Reserve Bank of New Zealand

The RBNZ cut the official cash rate by 50 basis points to 2.50% — its lowest level since July 2022 — exceeding forecasts of a 25-point cut. This marks the eighth rate reduction since the central bank began its monetary-easing cycle in August 2024.

The central bank has now lowered rates by a total of 300 basis points since August 2024, as inflation continues to cool toward the 2–3% medium-term target range and economic activity and labor markets remain weak.

“The Monetary Policy Committee reached a consensus to reduce the official cash rate by 50 basis points to 2.5%,” the RBNZ said. “The Committee remains open to further reductions in the official cash rate as needed to ensure inflation stabilizes sustainably near the 2% midpoint of the target range over the medium term.”

Wednesday’s meeting was the second-to-last under Governor Christian Hawkesby, who will be succeeded by Swedish policymaker Anna Breman on December 1.

This dovish stance offers some political relief to Prime Minister Christopher Luxon, whose government has suffered sharp declines in popularity amid a faltering economic recovery that failed to materialize as promised during last year’s election campaign.

Interest Rate Outlook

• Following the RBNZ decision, market pricing for another 25-basis-point cut at the November 26 meeting surged above 95%.

• Futures now indicate the policy rate could fall to around 2.0% by the end of the year.

Market Commentary

Nick Tuffley, chief economist at ASB Bank, wrote: “The RBNZ’s decision suggests that the risk of weaker inflation pressures than previously expected has outweighed the need to wait and see how quickly the economy recovers — or whether there are any side effects from the recent rise in inflation.”

Joseph Capurso, head of international and FX research at Commonwealth Bank of Australia, who had predicted a 50-point cut, said: “Markets had only priced in about a 30% chance of a 50-basis-point move today. A fall in the New Zealand dollar was inevitable after such a surprise.”

The Japanese yen fell in Asian trading on Wednesday against a basket of major and minor currencies, extending its losses for the fifth consecutive session against the US dollar and hitting an eight-month low. The currency remains under pressure from continued selling amid mounting concerns over Prime Minister-elect Sanae Takaichi’s expected economic policies.

Following her victory as leader of Japan’s ruling Liberal Democratic Party (LDP), Takaichi — who is set to become the country’s next prime minister — pledged to stimulate Japan’s economy through aggressive fiscal spending while criticizing the Bank of Japan’s recent rate hikes.

Price Overview

• USD/JPY: The dollar rose 0.5% to ¥152.65 — its highest level since February — from an opening price of ¥151.90, after touching a low of ¥151.74.

• On Tuesday, the yen closed down roughly 1.05% against the dollar, marking its fourth consecutive daily loss amid heightened political developments in Japan.

Sanae Takaichi

Takaichi’s weekend victory in the LDP leadership race — making her Japan’s first female prime minister in modern history — has sparked widespread debate among investors regarding her upcoming economic agenda.

A close ally of the late Shinzo Abe, Takaichi is known for supporting the stimulus-heavy policies that defined “Abenomics.” This reinforces expectations that her administration may adopt an expansionary approach favorable for Japanese equities but potentially negative for the yen, as it would likely extend the era of ultra-loose monetary policy.

She reiterated her commitment to boosting the economy through large-scale fiscal spending and repeated her criticism of the Bank of Japan’s decision to raise interest rates.

Interest Rate Outlook

• Following Takaichi’s win, market pricing for a 25-basis-point rate hike at the Bank of Japan’s October meeting dropped from 60% to 25%.

• Yen swap markets now imply a 41% chance of a rate hike by December — down from 68% before the LDP leadership election.

Market Commentary

• Lou Brien, strategist at DRW Trading in Chicago, said: “There will be a period of adjustment as investors try to gauge how Takaichi’s policies will affect the currency.”

• Mohammed Al-Sarraff, foreign-exchange researcher at Danske Bank, noted: “The Bank of Japan may hold rates steady this month as a precaution, but by December it will likely have more data — and I expect another hike then.”

• He added: “Inflation remains too high, interest rates are still too low, and the rationale for another rate increase this year persists.”

The Reserve Bank of New Zealand (RBNZ) announced its interest rate decision on Wednesday morning following its October 8 meeting, cutting the official cash rate by 50 basis points to a range of 2.50% — the lowest level since July 2022. The move exceeded market expectations, which had projected a 25-basis-point cut, marking the eighth rate reduction since the central bank began its monetary-easing cycle in August 2024.

The RBNZ stated that its Monetary Policy Committee “remains open to further reductions in the official cash rate as needed to ensure inflation stabilizes sustainably near the 2% midpoint of the target range over the medium term.”

• This statement is considered bearish for the New Zealand dollar.

Ethereum prices declined on Tuesday as traders engaged in profit-taking, even as demand for most risk assets remained strong due to continued inflows into exchange-traded funds (ETFs).

Market sentiment was dampened after the US Senate failed for the fifth time to pass a bill extending government funding through November 21.

Republicans still need the backing of at least eight Democrats to reach the 60-vote threshold required to approve legislation allowing federal funding.

As a result, US President Donald Trump criticized congressional Democrats in a post on Truth Social, saying he was willing to work with them on healthcare and other issues — provided they agree to reopen the government.

Meanwhile, investors continue to expect a 25-basis-point rate cut at the Federal Reserve’s upcoming policy meeting on October 28–29, followed by another similar reduction in December.

Ethereum

As of 20:30 GMT, Ethereum dropped 5.2% to $4,464.8 on CoinMarketCap.