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.
