Aussie holds firm as Kiwi plunges after surprise RBNZ decision

The Australian dollar held relatively firm on Wednesday, October 28, while the New Zealand dollar suffered heavy losses after its central bank unexpectedly left interest rates unchanged, widening the policy divide between the two economies.

Stronger Australian inflation figures reinforced expectations of another interest rate increase, while the Reserve Bank of New Zealand's surprise decision triggered selling in the kiwi.

Price overview

AUD/USD traded around $0.7030, gaining 0.06% in Wednesday's streaming quotation, while NZD/USD fell 1.16% to approximately $0.5615.

AUD/NZD climbed above NZ$1.23 as the Australian currency outperformed its New Zealand counterpart.

Australian inflation strengthens rate hike expectations

Australia's annual inflation accelerated to 4.3% in September from 4.0% in August, while underlying inflation reached 3.6%.

The figures reinforced expectations that the Reserve Bank of Australia could raise interest rates at its November 3 meeting.

RBA officials warned that inflation remains too elevated, with higher energy and housing costs complicating efforts to restore price stability.

The central bank has already raised rates four times this year, bringing its benchmark rate to 4.6%.

New Zealand dollar tumbles after surprise decision

The Reserve Bank of New Zealand unexpectedly maintained its benchmark interest rate at 2.75%, defying expectations of an increase to 3.0%.

The decision passed by a narrow 4–3 vote, exposing divisions among policymakers over the appropriate response to inflation.

Although Governor Anna Breman indicated that further tightening remains likely, the decision prompted investors to reassess the timing of future increases.

Federal Reserve decision approaches

Both currencies also face uncertainty ahead of Wednesday's Federal Reserve announcement.

US policymakers are expected to leave rates unchanged, although persistent inflation could encourage a more hawkish outlook.

Market outlook

The Australian dollar's resilience will depend on expectations for next week's RBA meeting, while the New Zealand dollar remains vulnerable following the RBNZ surprise.

The divergence in monetary policy expectations could sustain demand for the Australian dollar against its New Zealand counterpart.