[achiever]

In line with the market expectations, the RBNZ left its Official Cash Rate (OCR) unchanged at 2.50% today. The RBNZ's accompanying statement, however, is dovish and aims at talking down the currency. The RBNZ expresses concern about a tightening in local monetary conditions due to the higher exchange rate. While traders think that this "verbal" intervention will have a short-term impact, the NZD's performance against the G3 currencies will remain determined by the market's attitude to risk.

The largest impact of the RBNZ's rhetoric will be the NZD's performance against other commodity currencies. In particular, the AUD/NZD cross could head higher, given that the RBNZ stands in stark contrast to the RBA, which recently has become relatively bullish. RBNZ's rhetoric may provide good levels to sell AUD/NZD, as some continue to think the NZD will be an outperformer amongst G10 currencies over the coming 6 months. While the RBNZ maintains that the OCR could go "modestly lower", this reflects an easing bias forced on it by the stronger currency. Market continues to think that the RBNZ is on hold until Q1 2010, when it will begin to take back some of its easing.