Kiwi powers up after RBNZ rate hike

The New Zealand dollar gained ground in European trade away from recent multi-week lows against dollar after the Reserve Bank of New Zealand hiked interest rates to 2008 highs as expected. 

The RBNZ pointed to the need of multiple more rate hikes until inflation is brought back under control. 

The kiwi rose 0.5% against its US counterpart to 0.6246, with a session-high at 0.6200, and after losing 0.6% yesterday, resuming losses and edging near six-week lows at 0.6194. 

RBNZ 

As expected, the Reserve Bank of New Zealand increased interest rates by 50 basis points to 4.75%, the highest since December 2008. 

The RBNZ also said that lending rates will need to rise even further in upcoming months to rein in inflation.

It pointed to continued inflationary pressures in the markets, while the labor sector continues to tighten as well. 

Similarly, Federal Reserve officials asserted the need for further policy tightening as shown in the November meeting minutes until inflation is brought to 1-3%. 

The Fed expected peak interest rates at 5.5% at some time in the first half of the year, with even more rate hikes in the second half.