NZD

The New Zealand dollar steadied at 0.582, remaining near a six-week high, supported by growing expectations of further interest rate increases following a hot inflation reading. New Zealand’s annual inflation accelerated to 4.1% in Q2 from 3.1% in Q1, exceeding both market forecasts of 4% and the RBNZ’s projection of 3.9%. It marked the highest level since Q4 2023 and pushed inflation further above the central bank’s 1–3% target range. The hot print solidified wagers that the central bank will deliver another 25-basis-point rate hike in September, with swaps also implying additional increases in either October or December, followed by another move in February next year. Last week, RBNZ Chief Economist Paul Conway said that Middle East-driven inflation risks to the third quarter outlook have increased, and that some further reduction in monetary stimulus is likely to be needed.

The New Zealand dollar remained at a six-week high, hovering around $0.584, as the prospect of additional rate hikes at home helped offset a broader risk-off move amid escalating US-Iran tensions. The Reserve Bank of New Zealand is widely expected to raise interest rates again in September, with the OCR projected to reach at least 3.0% by the end of the year. Earlier this week, RBNZ Chief Economist Paul Conway warned that renewed hostilities in the Middle East could reignite inflationary pressures, potentially prompting the central bank to tighten policy further after last week’s first hike in more than three years. Meanwhile, the US dollar rebounded from a near one-month low after the latest data pointed to continued resilience in the US economy, capping further gains in the kiwi. For the week, the currency rose more than 1%, marking its third straight week of gains.

The New Zealand dollar hovered near a six-week high at around $0.583, supported by expectations that the Reserve Bank of New Zealand will continue tightening monetary policy, alongside broad weakness in the US dollar. Markets widely expect the RBNZ to deliver another rate hike in September, with the OCR seen reaching at least 3.0% by the end of the year. RBNZ Chief Economist Paul Conway said earlier this week that renewed conflict in the Middle East could fuel inflationary pressures, reinforcing the case for further policy tightening following last week’s first rate increase in more than three years. Meanwhile, the greenback hovered near a one-month low as investors scaled back bets on a near-term Federal Reserve rate hike after softer-than-expected inflation data. However, escalating geopolitical tensions remain a downside risk for the New Zealand dollar, as heightened uncertainty could weaken global risk appetite and weigh on risk-sensitive currencies such as the kiwi.

The New Zealand dollar rose to around $0.577 on Tuesday, its highest level in four weeks, following remarks from RBNZ Chief Economist Paul Conway. Conway warned that inflation may not ease as quickly as the central bank expects, raising the possibility of further interest rate hikes. Last week, the RBNZ lowered its forecast for third-quarter inflation to 3.3% from 4.3%, citing lower fuel prices following the interim US-Iran agreement. However, oil prices have rebounded in recent days as renewed fighting in the Middle East fueled supply concerns. The RBNZ’s hawkish stance last week, combined with a series of upbeat domestic economic data, has led markets to price in two additional rate hikes this year. However, the kiwi’s gains were limited as the standoff between the US and Iran intensified, with President Trump reimposing a US naval blockade of Iranian ports and announcing a 20% charge on all cargo shipped through the Strait of Hormuz, dampening risk appetite.

The New Zealand dollar held around $0.576 on Monday, hovering near its highest level in more than three weeks, supported by expectations of further interest rate hikes from the Reserve Bank. Swaps traders are pricing in nearly two additional quarter-point rate hikes from the Reserve Bank of New Zealand by year-end, following the central bank’s hawkish stance and strong manufacturing data last week. Additional support came from fresh data showing that New Zealand’s services sector returned to expansion in June for the first time since January, reinforcing the view that the economy is regaining momentum. However, escalating tensions in the Middle East are weighing on risk sentiment and limiting the kiwi’s gains. The US and Iran exchanged heavy missile and drone strikes over the weekend, with Tehran targeting US facilities across the Gulf and claiming it had once again closed the Strait of Hormuz.