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    NZD/USD: positive impetus continues, but… on 01.04.2016

    At the beginning of March RBNZ has reduced interest rate by 0.25% to 2.25%. Following this news the pair NZD/USD fell but later, it has significantly strengthened. After the second bad news about the decline in the world prices for dairy products by 2.9% the pair NZD/USD reached the low of March at the level of 0.6575. This week the pair NZD/USD has grown above the level of 0.6900. The rise in the pair was caused by the comments made by Janet Yellen that economic and financial uncertainty in the world represents risks for the American economy and force the bank to increase interest rates gradually. After the speech by Janet Yellen the USD Fell all over the market, and in the pair NZD/USD.

    The RBNZ faces problems associated with strengthening of the national currency against the USD, as the prices of commodities are denominated in the USD. Expensive national currency is not profitable for the exporters. About 20% of all products manufactured in New Zealand is intended for exports. The main sector of export is agriculture, exports of the dairy products amounts to 18% of the total volume of exports.

    The rise in exports, the decline in Chinese imports from New Zealand amid slowdown of the Chinese economy and low world prices for dairy products and other agricultural products have negative impact on the New Zealand’s economy.

    In March the RBNZ expresses concern about further deterioration of the prospect of global economy and the decrease of inflation expectations in New Zealand.

    Now, the introduction of monetary policy easing in New Zealand has been neutralized by the rise in NAD against the USD in March.

    Meanwhile, positive impetus caused by the speech of Janet Yellen remains. However further rise in the NZD will add pressure on the RBNZ. Expectations that the key interest rate in the country will be reduced to 1.75% from the current level of 2.25% at the meetings in June or August can prove true.

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