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New Zealand Dollar Jumps, RBNZ Puts Early End to Bond Buying

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SYDNEY, July 14 Reuters The New Zealand dollar jumped on Wednesday when the countrys central bank struck a surprisingly hawkish note by halting its bond buying stimulus programme, spurring speculation it might raise interest rates before the year is out.

The kiwi climbed 1 to 0.7017 after the Reserve Bank of New Zealand ended its monetary policy meeting by saying the strength of the economy meant the current level of stimulus could be reduced.

As a result, it decided to cease buying bonds by July 23, well ahead of what most analysts had assumed.

Market reaction was swift, with yields on twoyear bonds surging 9 basis points to its high for this year at 1.668. Investors had already been wagering a hike could come as early as November given strength in consumer demand, house prices and inflation.

Todays message is consistent with a central bank juggling nearterm inflation pressures and longterm deflationary forces, said Jarrod Kerr, chief economist at Kiwibank.

A rate hike in November is a definite maybe, he added. Although November still feels too early because we are still in the beginnings of our vaccine rollout, and much of the inflation pressure were experiencing should be deemed transitory.

A move by November would likely make the RBNZ one of the very first central banks in the developed world to raise rates, putting upward pressure on the kiwi and making the countrys exports less competitive.

It would also be in stark contrast to the Reserve Bank of…

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