Anna 
On Wednesday, the NZD/JPY pair continued its upward trajectory for the third consecutive session, advancing towards the 92.20 level following the Reserve Bank of New Zealand’s (RBNZ) hawkish stance. As widely anticipated, the central bank opted to keep its Official Cash Rate (OCR) steady at 5.5%, maintaining this level for the sixth consecutive meeting.
The RBNZ’s committee expressed confidence that maintaining the OCR at a restrictive level over an extended period would help bring consumer price inflation back within the target range of 1 to 3 percent by 2024. Despite headline inflation slowing to a two-and-a-half-year low of 4.7% in the fourth quarter of 2023, it remains notably above the target level.
However, some economists view the RBNZ’s decision as dovish, particularly against the backdrop of New Zealand’s entry into a recession and a sharp decline in consumer confidence. Market sentiment suggests the possibility of the RBNZ’s first rate cut occurring in August.
On the other hand, the prospect of strong US inflation data coupled with weak Japanese economic indicators could increase the likelihood of Japanese authorities needing to intervene in the foreign exchange (FX) market. Nevertheless, Bank of Japan (BoJ) Governor Kazuo Ueda stated that the central bank would not adjust monetary policy solely to address FX fluctuations.
Governor Ueda emphasized the persistent deflation and low inflation levels in Japan, highlighting the challenges in influencing public inflation expectations through monetary base expansion. With trend inflation still below 2%, it remains crucial to support the economy’s trajectory towards achieving the 2% target by maintaining accommodative monetary conditions.
