Kiwi Dollar Hovers at Two-Week Low

The New Zealand dollar hovered around $0.595, near a two-week low, weighed by reduced prospects of early RBNZ rate hikes. Last week, Governor Anna Breman said improving economic conditions should allow growth to pick up this year without reigniting strong inflationary pressures, suggesting less urgency for further tightening. This comes after the central bank kept the cash rate unchanged, emphasizing that monetary policy will remain accommodative as inflation moves closer to the midpoint of its target band. As a result, investors now expect a lower likelihood of a rate hike occurring as early as September or October. Adding to bearish pressure, concerns over US tariffs rose after President Donald Trump announced an increase in global tariffs from 10% to 15%, posing risks to the currency given New Zealand’s heavy reliance on exports.

The New Zealand dollar rose to around $0.599, rebounding from a two-week low, supported by a weaker US dollar amid trade risks. This followed President Donald Trump’s announcement to raise global tariffs from 10% to 15% after the Supreme Court struck down his “reciprocal” tariffs. Nevertheless, gains were limited by fading expectations of a near-term rate hike. Governor Anna Breman said the economy has room to recover this year without triggering excessive inflation, as pressures ease gradually, suggesting only a limited need for aggressive rate increases. The central bank recently held the cash rate steady, noting policy will remain supportive as inflation gradually approaches the midpoint of the target range. Breman added a rate hike later in 2026 is possible but not fully priced in. Meanwhile, unexpectedly strong Q4 retail sales showed the economy maintained momentum late in 2025, supporting the case for a rate hike later this year.

The New Zealand dollar weakened to around $0.595, hitting a two-week low, pressured by fading expectations of a near-term rate hike. Governor Anna Breman said the economy has room to recover this year without fueling excessive inflation, noting that pressures are easing gradually and suggesting limited need for aggressive rate hikes. This comes after the central bank earlier this week kept the cash rate steady, emphasizing that policy will remain supportive while inflation gradually moves toward the midpoint of the target range over the coming year. Breman added that a rate increase later in 2026 remains possible but is not fully priced in and will depend on how economic developments unfold relative to current forecasts. Market pricing now shows just a 40% chance of a September hike, down from 68%, while the likelihood of an October increase has fallen to 68% from 100%. For the week, the antipodean currency is set to post a decline.