The New Zealand dollar fell in Asian trading on Friday against a basket of major and minor currencies, giving up its two-week high against its American counterpart due to correction and profit-taking operations.

Despite this decline, the New Zealand currency remains on track to achieve its largest weekly gain since last January, thanks to the Reserve Bank of New Zealand's monetary policy meeting, which came out more hawkish than expected in the markets.

In line with expectations, the New Zealand central bank kept interest rates steady without any change at a 4-year low for the second consecutive meeting, and warned of rising inflation in the short term due to the repercussions of the Iranian war and high global oil prices.

Price overview

- New Zealand dollar exchange rate today: The New Zealand dollar fell against the U.S. dollar by about 0.3% to (0.5845), from the opening price of today's trading at (0.5862), and recorded a high of (0.5864).

- The New Zealand dollar ended Thursday's trading up by 0.65% against the U.S. dollar, in its fourth consecutive daily gain, and recorded a two-week high at 58.74 cents.

- Following the Reserve Bank of New Zealand meeting, markets expected up to three increases in New Zealand interest rates this year.

Weekly trading

Over the course of this week's trading, which officially ends at the settlement of prices today, the New Zealand dollar is up so far by about 2.8% against the U.S. dollar, on the verge of achieving its first weekly gain in the last three weeks, and its largest weekly gain since last January.

Reserve Bank of New Zealand

The Reserve Bank of New Zealand (RBNZ) on Wednesday held its benchmark interest rate unchanged at the 2.25% range, which is considered the lowest level since July 2022, in line with most expectations in global markets, and for the second consecutive meeting.

The New Zealand central bank indicated that the Iranian war has led to a significant change in the economic outlook and the balance of risks related to inflation and economic growth in the near term in New Zealand.

The bank warned of its readiness to move decisively if the energy and Middle East crisis leads to sustained inflationary pressures, hinting that the next step could be a rate hike later this year.

The bank expects inflation to rise in the near term as a result of increased fuel and oil prices. GDP growth forecasts were adjusted to become weaker due to declining domestic demand.

Anna Breman

The Governor of the Reserve Bank of New Zealand, "Anna Breman," said: If we notice that inflation in the medium term has begun to rise, we will take decisive action, and this means raising interest rates. The balance of risks regarding inflation has changed, and there are greater risks to the upside.

Breman explained: The monetary policy makers agreed that a rate hike was not necessary this month, but the possibility of raising it was discussed, as was also the case regarding the possibility of raising it in May.

New Zealand interest rates

- Following the meeting mentioned above, the pricing of the probability of raising New Zealand interest rates by about 25 basis points at the May 27 meeting rose to above 50%.

- The pricing of the probability of raising New Zealand interest rates by about 25 basis points at the July meeting rose to above 90%, with the expectation that this year will see three interest rate increases.

- In order to re-price these probabilities, investors await the release of several important economic data points from New Zealand regarding inflation, unemployment, and economic growth over the coming period.