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

Release date
03/10/2012
Reference
AN2012/09
Authors
Jason Wong; Bevan Cook
ISSN
2230‐5505
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.