NZD/USD plummets to six-month low, below mid-0.5700s on RBNZ's dovish 50 bps rate cut

NZD/USD meets with heavy supply in reaction to the RBNZ's surprise 50 bps rate cut.

The RBNZ said that it remains open to further rate cuts as required to control inflation.

A softer risk tone and some follow-through USD buying also exert pressure on the pair.

The NZD/USD pair attracts aggressive selling for the second straight day on Wednesday and dives to its lowest level since April 11, below mid-0.5700s during the Asian session.

The Reserve Bank of New Zealand (RBNZ) decided to lower the Official Cash Rate (OCR) by 50-basis-points (bps), to 2.50% from 3.00%, compared to the broader market expectations for a 25 bps rate reduction. In the accompanying policy statement, the central bank showed readiness to cut the OCT further as required for inflation to settle sustainably near the 2% target mid-point in the medium term. The surprise jumbo rate cut, along with the dovish outlook, turns out to be a key factor weighing heavily on the New Zealand Dollar (NZD).

Apart from this, a slight deterioration in the global risk sentiment contributes to driving flows away from the perceived riskier Kiwi. The US Dollar (USD), on the other hand, gains positive traction for the third straight day and climbs to its highest level since early September. This further contributes to the NZD/USD pair's steep intraday decline and backs the case for further losses. However, bets that the US Federal Reserve (Fed) will lower borrowing costs two more times this year could act as a headwind for the USD and support spot prices.