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NZD/USD plunges to near 0.6000 as Middle East tensions hit risk-perceived assets

  • NZD/USD plummets to near 0.6000 as tensions in the Middle East have battered demand for risk-sensitive assets.
  • The RBNZ is expected to reduce its OCR in the next month’s monetary policy meeting.
  • The US Dollar bounces back strongly as the Israel-Iran conflict boosts safe-haven demand.

The NZD/USD pair is down almost 0.1% to near the psychological support of 0.6000 on Friday. The kiwi pair faces a sharp sell-off as antipodean currencies underperform amid escalating tensions between Israel and Iran.

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 weakest against the US Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD0.42%0.34%0.22%0.13%0.79%0.94%0.20%
EUR-0.42%-0.03%-0.15%-0.23%0.45%0.49%-0.23%
GBP-0.34%0.03%-0.18%-0.27%0.40%0.51%-0.18%
JPY-0.22%0.15%0.18%-0.07%0.58%0.71%-0.03%
CAD-0.13%0.23%0.27%0.07%0.64%0.83%0.09%
AUD-0.79%-0.45%-0.40%-0.58%-0.64%0.13%-0.58%
NZD-0.94%-0.49%-0.51%-0.71%-0.83%-0.13%-0.71%
CHF-0.20%0.23%0.18%0.03%-0.09%0.58%0.71%

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).

Early Friday, Israel launched a series of attacks on military and nuclear targets in the northeast region of Tehran, aiming to stop the nation from building nuclear warheads. Israeli Prime Minister (PM) Benjamin Netanyahu stated that their military forces launched Operation Rising Lion to “roll back the Iranian threat to Israel’s very survival”.

On the domestic front, the New Zealand Dollar (NZD) weakens amid firm expectations that the Reserve Bank of New Zealand (RBNZ) will cut interest rates again in the policy meeting in July. Till now, the RBNZ has slashed its Official Cash Rate (OCR) by 225 basis points (bps) to 2.25% since August 2024, when it started its monetary-expansion cycle.

Meanwhile, Middle East tensions have increased safe-haven demand for the US Dollar (USD), which has been battered significantly this week due to uncertainty over the United States' (US) tariff policy. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, bounces back to near 98.30 from the fresh three-year low of 97.60 posted on Thursday.

On Wednesday, US President Donald Trump said that he is prepared to send letters stating the final trade agreement and tariff rates to those trading partners from whom Washington has not received any proposal or those who are not negotiating in good faith.

US Dollar FAQs

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.

 

Author

Sagar Dua

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

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