Kiwi, Aussie steady before key policy tests

The New Zealand dollar (NZDUSD) was little changed around $0.57 on Monday, with traders focused on a closely watched Reserve Bank of New Zealand decision due on Wednesday. Markets were fully pricing a 25-basis-point increase in the RBNZ cash rate at that meeting, which would lift the rate to 3.0% and mark a third interest rate hike this year. The currency’s calm start to the week followed a 0.8% gain in the previous week, its second consecutive weekly rise, which partially offset a seven-week decline that began at the end of August.

Market participants were also attentive to how the RBNZ might signal its intentions for the coming months. Westpac projected additional 25-basis-point increases in December and February, which would take the official cash rate to 3.5%. That level is described as roughly in line with the RBNZ’s estimate of the neutral rate, at which point the pace of any further tightening is expected to slow. Technical levels for the kiwi showed resistance near a one-month high of $0.5709, underscoring the recent stabilisation after earlier weakness.

The Australian dollar (AUDUSD) traded near $0.7030 and was flat on the day, pausing after a 1.3% rise over the previous week. The immediate focus for the currency was the upcoming quarterly inflation release, which is seen as pivotal for the Reserve Bank of Australia’s next interest rate decision. Forecasts for the trimmed mean measure of inflation centre on a 1% quarterly increase, leaving annual inflation at 3.6%. That annual rate remains above the RBA’s 2% to 3% target range.

Economists highlighted that the RBA’s policy choice at its next meeting would depend heavily on both the size and composition of the Consumer Price Index outcome. The central bank has already lifted rates several times this year, and another increase would be its fifth in 2026. RBA Governor Michele Bullock and other senior officials are scheduled to appear before lawmakers on Wednesday, where the latest inflation figures and implications for interest rates are expected to feature prominently in questioning.

Beyond the Antipodean currencies, broader foreign exchange trading was subdued at the start of what is expected to be a busy week for monetary policy decisions. The dollar index (DXY), which tracks the US currency against a basket of major peers, was slightly weaker at 101.64, as a pullback in oil prices and US Treasury yields weighed on the greenback. Major currencies overall traded in tight ranges, reflecting caution ahead of multiple central bank announcements.

Five major central banks are due to decide on policy later in the week. The US Federal Reserve, the European Central Bank and the Bank of Japan are expected to keep interest rates unchanged, while markets are pricing potential rate hikes from the Bank of Canada and the Reserve Bank of New Zealand. With policy rates already elevated in several economies, investors are watching both the decisions and the guidance on future moves for signals on how long restrictive settings might persist.