The New Zealand dollar fell broadly in Asian markets on Wednesday against a basket of major and minor currencies, extending losses for the second consecutive day against its US counterpart and hitting a four-month low. The decline came amid accelerating open-market selling following the release of the Reserve Bank of New Zealand’s monetary policy decision.

The RBNZ cut interest rates by 25 basis points to 3.0%, the lowest level since August 2022, and signaled further easing if inflationary pressures continue to decline in line with its forecasts.

When deciding on the 25-basis-point cut, in line with most market expectations, the RBNZ Board also considered a larger 50-basis-point reduction.

Price Overview

• The New Zealand dollar fell against the US dollar by around 1.25% to 0.5820, its lowest level since April 14, down from the opening price of 0.5893, after recording a high of 0.5899 earlier in the session.

• On Tuesday, the New Zealand dollar ended trading down by about 0.5% against the US dollar, its first loss in three days, as the greenback strengthened against most major and minor currencies.

Reserve Bank of New Zealand

As expected, the RBNZ cut its benchmark interest rate by 25 basis points to 3.00% on Wednesday, the lowest since August 2022. This marked the seventh rate cut since the start of the easing cycle a year ago.

The RBNZ has now lowered rates by a total of 250 basis points since August 2024, citing slowing inflation within its medium-term 2–3% target, weakening economic activity, and a softer labor market.

Today’s decision was approved by a majority of the Monetary Policy Committee, with four members voting for the 25-basis-point cut and two voting for a bolder 50-basis-point reduction.

The central bank said that if inflation continues to decline as expected over the medium term, the committee foresees additional rate cuts.

It also noted both upside and downside risks to the outlook. Cautious behavior by households and businesses could weigh further on growth, while the economy might recover more quickly as the full effects of rate cuts take hold.

New Zealand Interest Rates

• Following the RBNZ meeting, markets priced in more than a 50% chance of a 25-basis-point cut at the October 8 meeting, and above 95% for November.

• Futures markets now suggest New Zealand rates could fall to 2.5% by year-end.

• Stephen Toplis, Head of Research at Bank of New Zealand, said that given the dovish tone of the statement, the bank now expects 25-basis-point cuts in both October and November.

The Reserve Bank of New Zealand announced its interest rate decision on Wednesday morning at the conclusion of its August 20 meeting, cutting the benchmark rate by 25 basis points to a range of 3.00%, the lowest level since August 2022. The move was in line with market expectations and marked the seventh rate cut since the start of the monetary easing cycle in August 2024.

The RBNZ stated that further cuts are likely if medium-term inflationary pressures continue to ease in line with the bank’s forecasts.

Ethereum fell sharply on Tuesday alongside a broad sell-off in digital assets, driven by investor withdrawals from several US-based cryptocurrency funds.

US spot Ethereum ETFs recorded outflows worth $197 million on Monday, the second-largest daily redemption on record. The sell-off coincided with record-high ETH unstaking requests, with pending withdrawals reaching $3.9 billion. Timothy Messer, head of research at BRN, said both factors “are weighing on market sentiment in the near term.”

He added in a note to investors that the $4,400 level now represents a critical support for the world’s second-largest cryptocurrency. According to CoinGecko, Ethereum is currently trading at $4,203.84, little changed from the previous day.

The outflows follow Ethereum’s failure to reach a new all-time high above its November 2021 peak of $4,891.70, after gains stalled at $4,776.32 on Thursday, August 14.

Analysts say the moves reflect profit-taking after Ethereum rose 66% over the past year, attracting broad institutional interest. Data shows that Ethereum funds hold about 5.08% of total supply, and Messer expects this share could soon exceed the 6.38% held by Bitcoin funds “if inflows continue at the current pace.”

Bitcoin funds also faced pressure, with Monday outflows totaling $122 million. While Bitcoin retreated from last Thursday’s record $124,457.12, Messer noted that “whales” continue accumulating, adding 20,061 BTC to wallets holding 10,000 coins or more over the past six days.

The declines came amid high-profile political developments, as President Donald Trump hosted European leaders at the White House to discuss the Ukraine war following an inconclusive summit with Russian President Vladimir Putin. Messer wrote that “crypto markets remain sensitive to such signals,” adding that the prospect of further talks could boost risk appetite.

He pointed to structural support for Bitcoin at $115,000, saying a breakout above $121,000 could pave the way for a retest of the $123,000–127,000 zone.

He concluded: “Geopolitical developments around US-Ukraine-Russia talks add two-way risks: a ceasefire could push Bitcoin above $120,000, while escalation would warrant caution. A defensive stance and selective buying remain the most prudent strategy.”

Ethereum 

On the trading front, Ethereum declined by 5.7% to $4,124 on CoinMarketCap as of 20:13 GMT.

Throughout his tenure, Federal Reserve Chair Jerome Powell has used the central bank’s annual research conference in Jackson Hole, Wyoming, as a platform for decisive messages. In 2022, he pledged to fight inflation at any cost, while last year he reaffirmed his commitment to supporting the labor market with promises of rate cuts as unemployment appeared to be rising.

But in his farewell address to the conference this year, before his term ends in May, Powell faces a difficult choice between the two paths, as conflicting economic signals have complicated his “data-dependent” strategy. Some indicators point to slowing growth, while others highlight persistent inflation risks. With colleagues divided over which threat is greater — inflation or unemployment — investors and the Trump administration strongly expect the Fed to cut rates at its September meeting.

What may prove more important than the cut itself, however, is how Powell frames the next steps in assessing an economy that shows signs of slowing in some areas yet resilience in others, with renewed hints of price pressures. Despite his adaptability, Powell may be forced to remain squarely between the Fed’s dual mandates: price stability and maximum employment.

Richard Clarida, former Fed vice chair and now global economic advisor at PIMCO, said: “The Powell I know wants to be data-dependent and not move too early. If there is a cut in September, the real challenge will be communication: is it a one-off, or the start of five or six cuts? Even if they want to cut, the messaging will be tough.”

Powell’s speech, set against the backdrop of the Grand Teton mountains near Jackson Hole, will close out an eventful eight-year tenure marked by an unprecedented pandemic response, a wave of inflation that triggered record rate hikes, and personal criticism from President Trump.

In 2022, Powell invoked the legacy of former Fed Chair Paul Volcker, vowing to crush inflation “whatever it takes,” even at the cost of jobs and growth. Today, he faces pressure to emulate Volcker’s successor Alan Greenspan, whom Powell has often cited in Jackson Hole, by looking beyond inflation signals and steering rates back to a “neutral” level near 3%, down from the current 4.25%–4.5%. That level is no longer restrictive to growth and would be appropriate if policymakers feel confident inflation is returning to the 2% target.

Looking Ahead

Inflation remains about a percentage point above target, with signs it could rise further. Still, the Trump administration argues that the risk of sustained price growth is limited and will be offset by regulatory rollbacks and productivity gains.

Treasury Secretary Scott Bessent criticized the Fed, saying: “They are trying to be more data-dependent, and I think that’s a mistake,” noting that such an approach forces policymakers to wait for confirmed disinflation, while Greenspan in the 1990s “was forward-looking,” betting on a productivity surge that ultimately helped tame prices.

Fed Governor Christopher Waller, seen as a leading candidate to succeed Powell on Trump’s shortlist, has made similar arguments for downplaying tariff-driven inflation risks. He has called for immediate rate cuts to protect a softening labor market, in contrast to colleagues urging more caution.

Powell himself has so far aligned with this cautious camp. From the start, he emphasized acting on real data rather than models or forecasts, ready to move swiftly if needed but always with restraint. While this approach helped avoid premature mistakes, it left him vulnerable to lagging responses, given the delays in monetary policy effects and the risk of later data revisions. Indeed, the Bureau of Labor Statistics recently slashed prior job growth estimates for May and June in a historic downward revision, bolstering Waller’s case that the labor market is weaker than it appears.

Clearing Fog?

With growth slowing to around 1%, administration officials such as Bessent now stress that the broader data picture is weaker than last September, when Powell supported jobs with a half-point cut. They ask: if the economy is weaker, why not cut now?

They also point to contradictions between the “data-dependent” slogan and the Fed’s decision to halt rate cuts earlier this year over future tariff concerns. Trump’s tariffs came in far higher than expected, and while the fallout has not been as severe as some economists warned, the Fed has only recently expressed more confidence about the outlook.

Richmond Fed President Thomas Barkin said: “The fog is clearing,” suggesting greater clarity in economic projections.

Powell must now define how far that fog has lifted — whether conditions justify a sustained cutting cycle, a single cautious move, or continued patience.

What sets the backdrop apart from last year is that rates are already lower and less restrictive, equity markets are buoyant, unemployment remains steady, while inflation — which was falling month by month then — has recently shown little improvement and even signs of rising again.

Even Waller, who advocates rapid easing, acknowledged: “If I’m wrong about inflation or labor market weakness, we can hold policy steady for a meeting or two.”