RBNZ communicates it wants to hike rates, NZD up another 3 to 5%?

FXstreet.com (Barcelona) - In a very explicit fashion, the Reserve Bank of New Zealand said "rates hikes will be requited in 2014, with the extent and timing of the rise in policy rates will depend largely on the degree to which the momentum in the housing market and construction sector spills over into broader demand and inflation pressures raise interest rates."

As soon as the market read that key paragraph, those NZD sellers caught short had to bail out of its positions, leading to an abrupt 50+ pips spike, as the market assimilates the growing deviation between RBNZ and other central banks around the globe.

According to Kathy Lien, Co-Founder at BK Asset Management, "This is the most direct signal of monetary tightening that we have heard from any of the G20 nations and this bias should be extremely positive for the NZD", adding that "The New Zealand dollar rally will likely gain traction thanks to the hawkish bias of the central bank."

Lien finished her take on the latest RBNZ outcome by saying: "As these are the most hawkish comments that we have heard from a major central bank, investors could start to see the NZD in a new light and drive the currency up another 3 to 5 percent."