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Chances are we probably won’t be hearing any hawkish statements from RBNZ Governor Alan Bollard when the central bank releases its interest rate decision tomorrow. My spies over at the Tasman Sea have been on the lookout, waiting to intercept any radio signals about a potential rate hike but so far, nothing has popped up. Unlike the recent hawkish statements of the RBA, it looks like we’ll get another re-run of past dovish comments and an extension of their commitment to keep rates steady at 2.50%.

Recent economic figures just haven’t been up to par. For one thing, inflation remains weak as seen in their first quarter CPI reading of 0.4%, short of the 0.6% consensus. This wasn’t enough to make their annual inflation rate budge from 2%.

Also, consumer spending unexpectedly fell in February, implying that economic recovery is still far from sustainable. Retail sales printed a 0.6% decline instead of posting a 0.2% uptick while the core version of the report showed a 0.9% drop. These are more signs that New Zealand’s economy could still benefit from an even longer period of low interest rates.

Compared to the other commodity dollars, the Kiwi appears to be the weakest link. Both the Aussie and the Loonie have had some pretty amazing runs the past two months or so. After reaching a high of 1.0781 during the first week of February, the USDCAD, then made a strong slide. 800 lovely pips, in fact! Similarly, the AUDUSD has also soared 700 pips to set a new year-to-date high.

Sadly, the Kiwi has lagged behind. During the same period, the NZDUSD only managed to book a gain of a little more than 400 pips, reaching a high of 0.7203.

It appears that both the Aussie and the Loonie got boosts from their respective central banks. Both the Reserve Bank of Australia and the Bank of Canada were quite hawkish during their last monetary policy decisions, making the race for the best currency of 2010 tighter. If the RBNZ holds its stance to maintain its interest rate unchanged until the middle of the year, this will only hinder the Kiwi from making any significant gains, making the gap between Kiwi and the two frontrunners wider.

Still, I can’t help but wonder what will happen once the bank’s commitment to keep rates unchanged expires on July. Remember, the bank assured the market that it will be keeping rates at 2.50% until the middle of this year way back in January. Will we see the RBNZ drop the commitment completely? Or will they carry on with their dovish ways?

Given how unstable the recovery is in New Zealand, it seems that the bank will favor a wait-and-see stance rather than “go hawk” like the Bank of Canada. New Zealand’s economic horizon still remains particularly cloudy, and with inflation unable to bust past 2.0%, policy makers have no real reason to hike rates. As close as New Zealand is Australia, their economies are still two very different things.

For now, all we can do is hope… Hope that, once the smoke clears, the RBNZ can finally comfort the markets and say that things are looking up for New Zealand.