Kiwi Strengthens After Shadow Board Says RBNZ Should Hold Rates

New Zealand’s dollar headed for the biggest gain in a week against the greenback after the central bank’s so-called shadow board said the monetary authority should hold its key interest rate at 2.25 percent at a policy meeting this week.

The kiwi rose against all but one of its 16 major counterparts after the group of academics, business people and economists put together by the New Zealand Institute of Economic Research said that while continued low inflation and a recent rebound in the kiwi dollar would suggest the need for lower rates, the Reserve Bank will be concerned with the increased financial stability risks from rising house prices.

New Zealand’s currency gained 0.3 percent to 68.77 U.S. cents as of 7:46 a.m. in London on Tuesday, set for the biggest advance since April 19. Reserve Bank of New Zealand Governor Graeme Wheeler unexpectedly cut the cash rate to a record on March 10, and said further easing may be needed. 

“The risk of another surprise rate cut by the RBNZ suggests the New Zealand dollar is at risk against the U.S. dollar at current levels above 68.50 cents,” said Mansoor Mohi-uddin, a Singapore-based strategist at Royal Bank of Scotland Group Plc.

Three of 16 economists surveyed by Bloomberg project policy makers will cut borrowing costs further on Thursday.

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