Ella 
In the Asian market on Wednesday, following the announcement of the policy decision of the New Zealand Reserve Bank, the New Zealand dollar/yen retreated sharply from the nearly two-week high hit in the Asian market and fell to the 88.00 mark.
Reserve Bank of New Zealand board members decided to cut the official cash rate (OCR) by 25 basis points (bps) to 5.25% for the first time in more than four years. The surprise measure defied economists’ expectations and came nearly a year ahead of the central bank’s forecast. In an accompanying policy statement, the central bank forecast more rate cuts in the coming months, citing recent progress toward its annual inflation target and weak domestic economic growth. This has therefore severely depressed the New Zealand dollar and increased downward pressure on the New Zealand dollar/yen.
At a press conference after the meeting, New Zealand Reserve Bank President Adrian Orr said that policymakers considered a series of measures and unanimously agreed to cut interest rates by 25 basis points. Orr added that interest rates will not return to neutral during the forecast period, as forecasts point to a return to a period of low-level inflation and stability. The speech provided little respite for New Zealand dollar bulls, although a resurgence in risk sentiment weighed on the safe-haven Japanese yen and could boost the NZD/JPY cross. That said, further depreciation in NZD/JPY is still possible due to the lack of significant buying.
Investors now look forward to U.S. consumer inflation data due later in the North American session, which could create volatility in financial markets and affect yen demand. This in turn will provide some impetus to the NZD/JPY cross and create short-term trading opportunities.
