NZD: RBNZ warning shot - Nomura

Peter Dragicevich, Research Analyst at Nomura explains that Reserve Bank of New Zealand (RBNZ) officials caused a stir by noting that shifts in the Bank’s language on the NZD can be viewed as the “first step” towards possible FX intervention and that such a policy action is “always open to us”.

Key Quotes

“The RBNZ has a strict criteria, with “’active” intervention requiring four hurdles to be met. By contrast, “passive” intervention is less stringent. We do not think active FX intervention by the RBNZ is likely, but passive reserve management is possible. This has signalling qualities. Irrespective, the comments from policymakers could see market participants re-evaluate their bullish NZD positioning. We are comfortable holding our short NZD basket trade.”