New Zealand dollar NZDUSD +1.53% rose to 86.80 U.S. cents from 86.11 U.S. cents late Wednesday, hitting the highest level since May 6. The Reserve Bank of New Zealand on Thursday hiked its benchmark interest rate to 3.25% from 3%. The RBNZ said it expects the economy to grow by around 4% in the year to June, as there is “considerable momentum” behind the economic expansion, and expects inflationary pressure to increase. The central bank said the “speed and extent” of future rate hikes will depend on data and how it impacts inflation expectations.
“What really sent the Kiwi higher was the signal that there may be no pause in the cycle, as many, including ourselves, thought possible as early as next month,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in a note, referring to interest-rate hikes.