The New Zealand dollar (NZD) outperformed against the majors on a volatile day. This change came on the heels of the Bank of Japan’s (BoJ) decision to maintain its interest rate of 0.5%. No wonder, then, that world markets quickly overreacted to the news. The NZD was up 0.19% against the USD and up 0.09% against the EUR. At the same time, the Australian dollar (AUD) was a tad weaker against the NZD, showing a -0.01% appreciation.
The BoJ recently announced their continued commitment to maintain rates at these levels. This hawkish tilt to monetary policy is driving hawkish moods in currencies all around the world. The NZD made a small 0.15% gain against the British pound (GBP). It saw a bigger increase of 0.34% compared to the Japanese yen (JPY). This act outperformance reflects the current volatility of global currency markets as traders respond to economic signals from central banks.
Performance Against Major Currencies
The performance of the NZD varied quite dramatically across different currencies. It rose 0.19% against the USD, a testament of rebounding investor confidence as reinforced by reliable economic indicators from New Zealand. On the EUR, the NZD climbed 0.09%, keeping pace against expectations with a firm hand in the European market.
Moreover, the NZD showed strength against the GBP, with a percentage appreciation of 0.15%. Its performance against the AUD was a bit of a stinker, finishing down just -0.01%. The up and down changes indicate that in many markets the NZD is strong. This is not enough to shore up its contentious relationship with the AUD.
Strong Gains Against JPY and CAD
The NZD’s best performance was against the JPY, where it was up 0.34%. Thus it came as no surprise when the BoJ announced that they would keep interest rates at their current position. This action probably drove some investors to seek higher yields in other currencies such as the NZD. In addition, the NZD managed to gain 0.16% against the Canadian dollar (CAD).
The Swiss franc (CHF) made the biggest moves to the upside against all major currencies. It increased 0.06% compared to the USD and skyrocketed at 0.20% versus the JPY. In each case provided, the CHF proved a steadying presence when measured against the GBP. In fact, there was no percentage increase—the definition of stable over that period.
Implications of Central Bank Policies
The BoJ’s surprise decision to keep rates at 0.5% could have important implications for currency traders. With the AUD/JPY pair where it is right now at 100.70, traders are anxiously looking at how these stimulus decisions play cross-currency relationships. This steady interest rate is poised to affect trading strategies across all Asia-Pacific markets.
Neutral Both NZD and CHF are hard to read. This underscores the challenge that central bank policies can cause waves across all other currencies. The NZD has been resilient against all currencies. With more monetary policy tweaks on the way, exchange rates might change even more in the coming days.