The New Zealand dollar declined in Asian trading on Wednesday against a basket of major and minor currencies, hitting a two-week low against its U.S. counterpart. The drop followed a widely expected decision by the Reserve Bank of New Zealand to leave interest rates unchanged at their lowest level in three years.

The RBNZ stated that it expects to ease monetary policy if inflationary pressures continue to decline as projected over the medium term.

The Price

The New Zealand dollar fell around 0.3% against the U.S. dollar to 0.5979, its lowest level since June 24, down from the day’s opening price of 0.5995. It recorded an intraday high of 0.6015.

On Tuesday, the NZD had risen by approximately 0.1% versus the U.S. dollar, marking its first gain in five days as it attempted to recover from recent lows.

Reserve Bank of New Zealand

As anticipated, the RBNZ held its benchmark interest rate steady at 3.25% on Wednesday, its lowest level since April 2022, following six consecutive rate cuts, the most recent of which occurred at the prior meeting.

The central bank has slashed rates by a total of 225 basis points since August 2024. However, with inflation at 2.5% and concerns that trade tensions could heighten price pressures, the bank adopted a more cautious tone.

The RBNZ noted that if medium-term inflationary pressures continue to recede as expected, the committee anticipates further cuts to the Official Cash Rate (OCR).

The central bank added that the economic outlook remains highly uncertain. Additional data on the pace of New Zealand’s recovery, inflation persistence, and the impact of tariffs will shape the future path of interest rates.

The statement also highlighted that while higher export prices and lower interest rates are supporting New Zealand’s recovery, growing global policy uncertainty and tariff measures are likely to dampen global economic growth.

The RBNZ explained that this is expected to slow the pace of New Zealand’s recovery, which would ease inflationary pressures.

Markets now expect that the continued weakness in the economy will give the RBNZ enough room to cut interest rates at least once more this year.

New Zealand Rate Outlook

Following the RBNZ meeting, the probability of a 25-basis-point rate cut at the August 20 meeting rose above 60%.

Futures pricing for New Zealand interest rates suggests an OCR of 3.0% by year-end.

To reassess these expectations, investors will closely monitor upcoming key economic data from New Zealand, particularly reports on inflation, unemployment, and GDP growth.

The Reserve Bank of New Zealand (RBNZ) announced its interest rate decision on Wednesday morning at the conclusion of its July 9 meeting, keeping the official cash rate unchanged at 3.25% — the lowest level since April 2022 — in line with market expectations.

The RBNZ stated that it expects to ease monetary policy if medium-term inflationary pressures continue to decline as anticipated.

The Australian dollar began Tuesday’s session on a higher note after the Reserve Bank of Australia surprised markets by keeping the interest rate unchanged at 3.85%, defying expectations of a 25-basis-point cut.

Meanwhile, investors await the release of the NFIB Business Optimism Index for June, the only item on today’s US economic calendar, as attention remains focused on news related to US tariff policies.

RBA holds steady despite market expectations

The RBA announced in its statement early Tuesday that it decided to maintain the benchmark interest rate, citing the need for more data to confirm that inflation is steadily moving toward the 2.5% target.

At the press conference following the meeting, Governor Michele Bullock said it was appropriate to take a “cautious and gradual approach to monetary easing,” while also noting that the bank could anticipate further rate cuts if inflation slows as expected.

The decision contradicted market expectations for a rate cut, prompting the Australian dollar to recover after losing nearly 1% on Monday.

As of 19:52 GMT, the Australian dollar was up 0.6% against the US dollar at 0.6531.

Trump extends tariff deadline and warns Japan and South Korea

Late Monday, the White House announced that President Donald Trump had signed an executive order extending the deadline for new tariffs until August 1.

Despite this extension, Trump confirmed that the US would impose 25% tariffs on imports from Japan and South Korea, warning that if any country decided to raise its own tariffs, the increase would be added directly to the 25% rate imposed by the US.

These statements triggered a broad sell-off on Wall Street Monday, with major indices closing sharply lower, while the US Dollar Index (DXY) surged to a two-week high, rising more than 0.5% during the day.

However, on Tuesday morning, the dollar index began to decline and is now trading below the 97.50 level, while US stock futures are showing slight gains.

Michele Bullock reveals division within the RBA board

During the post-meeting press conference, Michele Bullock revealed that the board had a “very active discussion” on whether to hold or cut rates.

She clarified that the division was not about the direction of monetary policy but rather the timing. “The group in favor of a cut saw the economic data as slightly weaker and was more concerned about downside risks, especially internationally,” she said.

RBA reform recommendations now taking effect

This internal divergence comes amid structural reforms at the central bank. A key recommendation from the RBA’s comprehensive 2023 review was to publish how board members voted on rate decisions—without naming individuals—to enhance transparency and accountability.

Most of the review’s 51 recommendations have already been implemented, including:

Creating two separate boards for the bank instead of one

Reducing the number of interest rate meetings from 11 to 8 per year

Extending monetary policy meetings to span two days instead of one

Holding a press conference after each rate decision

One of the main recommendations still in progress involves publishing the number of votes for, against, and abstaining from each interest rate decision in the post-meeting statement.

Canadian dollar

As of 19:53 GMT, the Canadian dollar rose by less than 0.1% against its US counterpart to 0.7311.

US dollar

At 19:10 GMT, the US Dollar Index was up by less than 0.1% at 97.5 points, after recording a high of 97.8 and a low of 97.1.

On Monday, President Trump announced that his administration would impose 25% tariffs on imports from South Korea and Japan starting August 1, as part of a broader batch of tariff notifications sent to several countries.

The White House confirmed that Trump would sign an executive order to extend the temporary freeze on reciprocal tariffs until August 1, giving targeted countries an additional three weeks to reach agreements.

Today, Trump reiterated that the final deadline for the new tariffs would not be extended beyond August 1.

US Treasury Secretary Scott Bessent commented that the tariff policy would generate more than $300 billion in revenue for the US by the end of the year.

In a separate development, Trump renewed his criticism of Federal Reserve Chairman Jerome Powell, calling for his immediate resignation.

Gold prices declined during Tuesday trading amid a rise in the US dollar against most major currencies, alongside continued market focus on trade war developments.

US President Donald Trump announced on Monday that his administration would impose a 25% tariff on imports from South Korea and Japan starting August 1, as part of a new round of tariff messages to be sent to several foreign countries.

The White House confirmed on Monday that President Trump would sign an executive order to extend the temporary freeze on so-called “reciprocal tariffs” until August 1, giving targeted countries an additional three-week window to reach trade agreements with the United States.

Trump stated today that there would be no extension to the final deadline for the implementation of additional tariffs after August 1.

US Treasury Secretary Scott Bessent commented on the trade policy, saying that tariffs would generate revenues exceeding $300 billion for the United States by the end of this year.

In a separate context, Trump renewed his attacks on Federal Reserve Chairman Jerome Powell, demanding the latter’s immediate resignation.

The US Dollar Index rose by less than 0.1% to 97.5 points as of 19:10 GMT, recording a high of 97.8 points and a low of 97.1 points.

In terms of trading, spot gold contracts fell by 0.8% to $3,315.10 an ounce as of 19:11 GMT.