What analysts had predicted on cash rate cut, RBNZ has delivered with 25 bps to keep cash rate at 2.50%.

Despite the fact that Central bank has been able to deliver appropriate monetary decision there've have been speculations drifting around FX markets wrongly perceiving as RBNZ's statements would provide hawkish monetary stances.

In its statement, the RBNZ explicitly accepts that inflation will remain low in the near term, and has emphasized that its Policy Targets Agreement requires a medium-term focus on inflation.

The statement noted that the RBNZ is comfortable with current interest rate settings, but is prepared to cut further if circumstances change.

We don't think the gains have been justifiable and unlikely to sustain further.

Thus, on a long term hedging perspective, debit gamma put spreads are advocated so as to reduce the sensitivity and focus on hedging motive.

At current spot FX ticking at 0.6750, Selling 1W out of the money call option is recommended to reduce the cost of hedging by financing long position in buying 1M out of the money gamma put options considering long term downtrend that is still intact.

So, buy 1M (-1%) out of the money 0.11 gamma put option and short 1W (1%) out of the money call option.

For an instance let's suppose in next 1 week or 10 days' time or so NZDUSD declines about 60-100 pips (i.e. 0.6690 areas) put instrument becomes in the money and its Delta increased from -0.25 to -0.5, Gamma is responsible for this change.

Gamma controls the Delta. It is the mathematical formulae software that decides the change in Delta based on 1 point change in the underlying value.