Thursday local Wellington time sees the Reserve Bank of New Zealand interest rate decision. Rate futures are pricing in an 86.19 percent chance the New Zealand central bank leaves the cash rate unchanged at 2.5 percent. This is in line with the market consensus that the bank won’t raise rates until the second half of next year. The bank, the government and investors generally all seem to believe the exchange rate is too high so look for nothing in the policy statement to indicate anything that would only push it higher. The bank is bringing in tougher home loan regulations next month in a bid to underscore the hot housing market without tightening rates. There may be some signal of higher rates but that is probably an outside chance.
The latest speculator data shows net short positions on the kiwi by 797 contracts from 252 net long contracts the week before but what investors did in the immediate days ahead of the meeting will only be revealed Friday. Either way, it does not appear extreme positioning. The kiwi is almost over bought against the U.S. dollar with a 14-day exponential relative strength index print of 66.974. Monday’s action saw the kiwi break above 80 U.S. cents with a peak of 0.8031 and through the 100-day simple moving average at 0.8013. If anything the kiwi is likely to consolidate in the coming days ahead of the meeting. There is more risk to the downside in daily trading.