The New Zealand dollar before was falling to its lowest record since the November 2020 in the Asian trade session. After that, it was increasing after getting the news from the Central Bank. 

That institution just delay and not cancel the plan for increasing the interest rate. Unfortunately, that pair was locked again around the level of 0.6920 because of a reason. 

One of those reasons is the economy outlook uncertainty ahead of the national lockdown applied yesterday. The RBNZ decided to let the interest rate to stay around 0.25%.

That announcement from the New Zealand Central Bank is a sign that the chance of the rate increase is still opened as long as the economy uncertainty is fading. 

The Decision Made by the Government Policy

The decision was made within the context of the Government’s policy. It is due to the level 4 COVID-19 activities restrictions in all over the New Zealand. The committee makes a deal. 

They agree for reducing the monetary stimulus more than before to support the inflation expectation and continue to make a contribution to a maximum continuous employment. 

Furthermore, they also agree to keep the OCR and not change its value in that meeting. It is because the uncertainty is increasing when a country is in a lockdown situation. 

The market participants are now moving the RBNZ interest rate increase time expectation in several months ahead. That institution may become the first major central bank that makes that decision. 

The OCR Speed Is Sharper

The OCR speed is sharper than the prediction which was published before in May. The starting date of tightening shifted from the third quarter of 2021 to the fourth quarter of 2021. 

That signals rate hikes in October and November, by 25 basis points, respectively. The tightening cycle or RBNZ monetary policy is just delayed. The further dovish reaction may be not happened. 

The economy experts are now predicting that the interest rate increase will be happened on October, November, February, May, and August next year. That may lift the OCR. 

It is especially to the level of 1.5% like the pre-pandemic period. However their prediction depends on how succesful the elimination of this pandemic spread is. 

The NZD was Falling Significantly Before

Before, the New Zealand dollar was falling to the lowest record since November 2020 in the Asian session. That currency collapsed for more than 1 percent to the 0.6900s against the USD. 

The NZD/USD tried to climb as it entered the European session, but still circulated in the range of two-week lows. Market participants were surprised by the New Zealand government's decision.

It is especially to impose another nationwide lockdown, solely due to the discovery of one new COVID-19 case in Auckland. So far, the government there is so strict.

It is when they found the one new COVID-19 case in Auckland. That strict attitude is good to handle the virus spread in that country, but has a bad effect to the economy outlook. 

The Lockdown in Auckland

The prime minister in New Zealand announced that Auckland will have a lockdown for seven days. Meanwhile, the whole areas in that country will apply the highest lockdown level for 3 days. 

That information announced only a day before the RBNZ was predicted to announce the rate increase. They may become the first bank which apply that decision after the pandemic. 

Many market participants have been collecting the New Zealand dollar since a long ago with the bullish expectations after the rate hike. However, the Ardern's announcement dashed those bullish expectations.

Furthermore, it was also triggered a slump in the NZ dollar exchange rate. Some people are pesimistic that the institution will apply that policy amidst the long-term uncertainty.