NZ dollar skids as RBNZ flags gradual hikes, Aussie supported

According to Business Recorder, the New Zealand dollar weakened on Wednesday after the Reserve Bank of New Zealand pushed its official cash rate up 25 basis points, landing at 2.75%. The central bank signalled that more tightening is probable, but it described the process as slow and warned of notable downside risks to the economy. Market participants had been betting on a steeper climb toward a peak near 3.5%, so the restrained projections weighed on the kiwi.

Projections now put the cash rate at 2.81% by December and 3.15% by the end of 2027, barely above the May forecast. Westpac's New Zealand strategist Imre Speizer called it a slightly dovish hike and said his own arithmetic points to no move in October but a hike in December. Meanwhile, the swaps market pushed two-year rates down 3 basis points to 3.7001%, even as longer-term yields rose to five-month highs.

Australian data showed the economy expanded 0.4% in the second quarter, slightly above the 0.3% forecast, helped by electric vehicle purchases as petrol prices rose. Annual growth eased to 2.1% from 2.5% but still topped expectations, and traders lifted the odds of a rate increase this month from 49% to 58%. Bond yields in both countries rose in a global selloff sparked by Gulf fighting that pushed oil higher.