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Do actual and/or expected OCR changes affect the New Zealand dollar?

Jason Wong, Bevan Cook

In this note, we analyse the relationship between actual and expected Official Cash Rate (OCR) changes and subsequent exchange rate movements. Looking first at the simple relationship between actual OCR changes and the exchange rate, there appears to be a weak positive relationship between OCR changes and daily changes in the Reserve Bank’s trade-weighted index measure, the TWI. This weak relationship disappears when we look at weekly changes in the TWI.