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Why the New Zealand dollar could rally if the central bank stands pat

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The Reserve Bank of New Zealand is expected to keep its monetary policy unchanged on Wednesday.

The New Zealand dollar has been beaten up over the past months in the lead-up and aftermath of its general election in September, and traders are gearing up to face another catalyst on Wednesday afternoon when its central bank makes its policy decision. The Reserve Bank of New Zealand is expected to keep its monetary policy and official cash rate unchanged on Wednesday afternoon, but some predict the New Zealand dollar could have some upside after the decision. “We hold our tactical bias that the market has priced in too much of a risk premium in the kiwi dollar [in the] near term,” argued Marc McCormick, North America head of FX strategy for TD Securities, adding that he was looking for a “modest relief rally” after the RBNZ decision this afternoon at 3 p.m. Eastern time, 9 a.m. on Thursday new Zealand Daylight Time.
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