{"id":618406,"date":"2026-10-02T11:50:11","date_gmt":"2026-10-02T11:50:11","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/618406\/"},"modified":"2026-10-02T11:50:11","modified_gmt":"2026-10-02T11:50:11","slug":"weak-nz-dollar-high-oil-prices-pile-on-pressure-as-rbnzs-ocr-call-nears","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/618406\/","title":{"rendered":"Weak NZ dollar, high oil prices pile on pressure as RBNZ\u2019s OCR call nears"},"content":{"rendered":"While it\u2019s bad news for those planning an overseas trip and importers, a lower kiwi can help the economy \u2013 particularly exporters whose offshore earnings convert to more New Zealand dollars when they are repatriated.<\/p>\n
Inbound tourism also gets a boost.<\/p>\n
The New Zealand dollar hit US55.94c this morning \u2013 its lowest point since last December \u2013 before gaining a few pips to just over US56c.<\/p>\n
Against the aussie, the kiwi was at A80.85c, down from A83.90c in August and down by A7c since the end of 2025.<\/p>\n
Brent crude prices remain elevated at around US$102 a barrel, and diesel prices are expected to stay high for several months, even if the conflict in the Gulf were to end tomorrow.<\/p>\n
Concerns about the inflationary impact of higher oil prices and NZ currency weakness have been reflected in the overnight index swaps (OIS) market, which has priced in a 60% chance of a rate hike from the Reserve Bank come October 28.<\/p>\n
In addition, market pricing is also entertaining the idea of two hikes by the end of this year, and a 4.0% OCR by the end of 2027.<\/p>\n
The kiwi is not the only currency to pale in comparison with the strong US dollar.<\/p>\n
There was a sharp pullback in the euro overnight. The British pound also softened, as did the Japanese yen.<\/p>\n
The aussie dollar is also soft against the greenback.<\/p>\n
\u201cThe market is trading the kiwi like it is a low yielder \u2013 which it is now in this global environment,\u201d one foreign exchange dealer said.<\/p>\n
\u201cThe current price reflects concerns that the economy is struggling in the face of a negative terms of trade shock, which is what the oil shock is,\u201d he said.<\/p>\n
\u201cIt\u2019s going to be in struggle street for a bit longer yet, but we will have to see how it goes.\u201d<\/p>\n
The US dollar index, which measures the greenback against a basket of six major currencies, was last at 102.04 \u2013 a 17-month high.<\/p>\n
New Zealand\u2019s trade-weighted index (TWI) is at 64 \u2013 well short of the Reserve Bank\u2019s September projection of 66.9.<\/p>\n
ANZ strategist David Croy said the weakness of the TWI, relative to the Reserve Bank\u2019s projections, would feed into the central bank\u2019s rate call.<\/p>\n
\u201cMarkets have just got this idea that because it\u2019s a week before the [November 7] election, the Reserve Bank will be reluctant to hike.<\/p>\n
\u201cI don\u2019t see the RBNZ as being political animals. I just think they will do what they need to do.<\/p>\n
\u201cWhen the currency is tanking, it\u2019s not so much about a hike shoring up the kiwi at these levels \u2013 it\u2019s more about if they don\u2019t, then the TWI could go another point lower,\u201d he said.<\/p>\n
Kiwibank chief economist Jarrod Kerr said the kiwi was reflecting a weaker local economy and developments overseas.<\/p>\n
\u201cThe currency is doing exactly what it should be doing,\u201d he said.<\/p>\n
\u201cYou want the currency to weaken when your economy is soft because it makes you more attractive for foreign investment,\u201d he said.<\/p>\n
It also helped key exporters like Fonterra, and Kerr added inbound tourism looked to be getting a boost from cheaper kiwi dollars.<\/p>\n
\u201cThe flip side is that it\u2019s more expensive for us to buy stuff from overseas, so it adds a bit of inflation to the outlook,\u201d Kerr said.<\/p>\n
\u201cThat\u2019s unhelpful as it\u2019s coming at a time when Kiwis are being hit with higher petrol and diesel prices, and that might feed through to other imported products as well.\u201d<\/p>\n
Kerr said the Reserve Bank should \u201clook through\u201d the inflationary impact of high fuel prices and a weak currency in its decision-making come October 28.<\/p>\n
\u201cOne is making the other a little bit worse, but I think we should be looking through it because there\u2019s a lot of demand disruption out there.\u201d<\/p>\n
Jamie Gray is an Auckland-based journalist, covering the financial markets, the primary sector and energy. He joined the Herald in 2011.<\/p>\n
Stay ahead with the latest market moves, corporate updates, and economic insights by subscribing to our Business newsletter<\/a>\u00a0\u2013 your essential weekly round-up of all the business news you need.<\/p>\n","protected":false},"excerpt":{"rendered":"While it\u2019s bad news for those planning an overseas trip and importers, a lower kiwi can help the…\n","protected":false},"author":2,"featured_media":618407,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[806,1643,138,3043,6932,7011,543,88857,305,2959,4507,120,33091,4486,11688,111,139,69,10667,5908,4156,90,31531,423,21411,12937,2515,19257,304549,10665,18835,1961,27037,102,379,80],"class_list":["post-618406","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-as","tag-bank","tag-business","tag-call","tag-cash","tag-dollar","tag-driven","tag-factors","tag-have","tag-high","tag-late","tag-likely","tag-lowest","tag-month","tag-nears","tag-new-zealand","tag-newzealand","tag-nz","tag-ocr","tag-official","tag-oil","tag-on","tag-pile","tag-point","tag-pressure","tag-prices","tag-raise","tag-rate","tag-rbnzs","tag-reserve","tag-strong","tag-this","tag-weak","tag-with","tag-year","tag-zealand"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/618406","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=618406"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/618406\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/618407"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=618406"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=618406"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=618406"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}