New Zealand Dollar Rises on Weaker Greenback

The New Zealand dollar steadied at $0.603 on Friday but remained on track for a weekly gain, with investors shifting their focus to the Reserve Bank’s policy meeting next week. With the RBNZ expected to keep rates unchanged, attention will center on updated economic and rate projections, particularly whether it sticks to mid-2027 as the likely timing for the first increase. A mixed jobs report last week reinforced the case for steady policy in the near-term. However, inflation moved above target and economic activity showed signs of firming, keeping expectations of an eventual policy tightening intact. Traders assign a 75% probability to a hike in September, with a move fully priced in by October. Further supporting the case for an increase, data out today showed the manufacturing sector growth slowed in January but stayed above its long-term average, while business inflation expectations for one- and two-year horizons rose in Q1. So far this week, the kiwi has risen about 0.4%.

The New Zealand dollar rose to around $0.606, its highest level in two weeks, as investors continued to assess the Reserve Bank’s policy outlook. Labor market data released last week showed mixed results, with unemployment unexpectedly rising to a decade high while employment growth exceeded forecasts, reinforcing the view that a near-term rate hike is unlikely. Still, inflation remains above target and economic activity has shown signs of firming, keeping expectations of an eventual policy tightening intact. The RBNZ is set to meet this month for its first policy decision under Governor Anna Breman. With the central bank widely expected to hold rates steady next week, investors will closely watch its cash rate projections, particularly the timing of the first rate increase. Traders currently assign a 75% probability to a rate hike in September, with a move fully priced in by October.

The New Zealand dollar rose to $0.597 but stayed close to its lowest level in almost two weeks, amid reduced bets for an imminent rate hike from the Reserve Bank. A mixed jobs report earlier in the week, showing an unexpected rise in unemployment to a decade high, while employment increased more than forecast, prompted markets to push back expectations for a near-term rate hike. Traders are not fully pricing in an increase until October, while the implied probability of a September move stands at about 70%. The RBNZ is set to meet later this month in what will be the first meeting under its new governor, Anna Breman, and policymakers are widely expected to leave rates unchanged. The central bank will also release updated economic and interest-rate projections, with markets closely watching whether it maintains its guidance for a first rate increase around mid-2027. For the week, the kiwi has fallen about 1%, on track to snap a three-week winning streak.