MUFG Research discusses its reaction to the RBNZ's June policy statement.
"The RBNZ appeared to only begrudgingly acknowledge the better economic situation relative to expectations at today’s policy meeting and were more focused on the potential of what more might be needed in terms of additional easing going forward...But what impacted the FX market and fuelled NZD selling was the reference of concern over recent NZD strength, which was placing “further pressure on export earnings”. When you consider NZD’s overall performance it is clear that that the RBNZ’s bar of acceptance of NZD strength is pretty low," MUFG notes.
"The RBNZ is set to outline policy options in August and certainly a further increase in the Large Scale Asset Purchase program would be more likely if NZD has advanced further by then. Any notable NZD advance and the RBNZ would likely not hesitate to adjust LSAP to incorporate foreign asset purchases. We don’t expect negative rates and while we forecast broad USD weakness ahead, the communication and stance of the RBNZ will likely mean a clear underperformance for NZD in the months ahead," MUFG adds.