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New Zealand Dollar advances beyond 0.5900, highest since June 3 as USD stays weak

  • NZD/USD gains some follow-through positive traction amid the prevailing USD selling bias.
  • The incoming US macro data tempers Fed rate hike bets and keeps USD on the defensive.
  • Geopolitical risks could limit USD losses as traders keenly await China’s macro data dump.

The NZD/USD pair attracts buyers for the second straight day and climbs above the 0.5900 mark, hitting a fresh high since June 3 during the Asian session on Monday.

Soft US inflation and weak consumer spending data released last week undermined prospects for an immediate interest rate hike by the US Federal Reserve (Fed), which is seen as undermining the US Dollar (USD) and supporting the NZD/USD pair. In fact, the US Consumer Price Index (CPI) and the Producer Price Index (PPI) pointed to signs of cooling inflation. Adding to this, US Retail Sales fell 0.6% in July, marking the biggest monthly drop since May last year.

The New Zealand Dollar (NZD), on the other hand, benefits from the Reserve Bank of New Zealand's (RBNZ) hawkish tilt. The RBNZ has repeatedly stressed the need to withdraw some of its policy support, keeping bets for another interest rate hike firmly on the table. However, persistent geopolitical uncertainties, along with inflation risks stemming from volatile oil prices, could limit deeper losses for the safe-haven USD and keep a lid on the NZD/USD pair.

Strategists at Brown Brothers Harriman argue that the policy backdrop remains supportive for the Kiwi, noting that “above target inflation, more favorable domestic growth outlook, and a policy rate near the lower-end of the RBNZ’s neutral range (2.20%-4.10%) argue for additional RBNZ rate hikes.” They highlight that market pricing is already reflecting this hawkish bias, with “the swaps curve more than fully price in 75bps of tightening over the next twelve months to 3.25% which bodes well for NZD.”

In the latest developments surrounding the Middle East crisis, Treasury Secretary Scott Bessent says that the US is preparing to hit Iran with economic measures unlike anything seen before, with new steps expected as soon as this week. Adding to this, the US-Iran standoff, along with the effective closure of the Strait of Hormuz, keeps war-risk premiums in play and supports crude oil prices. This warrants caution for USD bears and caps the NZD/USD pair.

Nevertheless, the supporting fundamental backdrop suggests that the path of least resistance for the currency pair remains to the upside. Hence, any corrective pullback is more likely to be bought into and remain limited. Traders now look forward to China's macro data dump for some impetus. Market attention will then shift to the FOMC Minutes, due on Wednesday, which will play a key role in driving the USD and the NZD/USD pair in the near term.

New Zealand Dollar Price Today

The table below shows the percentage change of New Zealand Dollar (NZD) against listed major currencies today. New Zealand Dollar was the strongest against the US Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD-0.11%-0.13%-0.14%-0.05%-0.18%-0.24%-0.18%
EUR0.11%-0.05%-0.04%0.05%-0.04%-0.14%-0.07%
GBP0.13%0.05%0.00%0.09%0.02%-0.10%-0.02%
JPY0.14%0.04%0.00%0.10%-0.02%-0.09%-0.00%
CAD0.05%-0.05%-0.09%-0.10%-0.12%-0.20%-0.12%
AUD0.18%0.04%-0.02%0.02%0.12%-0.09%-0.05%
NZD0.24%0.14%0.10%0.09%0.20%0.09%0.07%
CHF0.18%0.07%0.02%0.00%0.12%0.05%-0.07%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the New Zealand Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent NZD (base)/USD (quote).

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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