New Zealand Dollar Rises After RBNZ Stands Pat

The New Zealand dollar rose toward $0.58, hitting its highest level in nearly two weeks, after the Reserve Bank kept its official cash rate steady at 2.25% as expected. The central bank adopted a cautious stance, noting that developments in the Middle East have significantly altered the outlook and the balance of risks for inflation. Near-term inflation is now expected to rise, while the economic recovery is projected to weaken. The RBNZ indicated it is ready to hike rates if inflation pressures intensify. The pause follows an aggressive easing campaign, during which the central bank cut rates by 325 basis points since August 2024 amid slowing growth and cooling inflation. The currency also gained amid improved risk sentiment after the US and Iran agreed to a two-week ceasefire on Tuesday, less than two hours before President Trump’s ultimatum to obliterate Iran was set to expire, with Tehran agreeing to temporarily reopen the Strait of Hormuz.

The New Zealand dollar edged up to $0.571 but remained near an over four-month low, as investors monitored the intensifying Middle East conflict and awaited the Reserve Bank's upcoming policy decision. President Donald Trump set a new deadline for Iran to reopen the Strait of Hormuz, warning that the US would target the country’s power plants and civilian infrastructure if it refuses to comply. Tehran rejected the proposal and threatened retaliatory strikes on comparable US-linked assets. Meanwhile, the Reserve Bank of New Zealand is widely expected to keep the official cash rate unchanged at 2.25% later this week as it weighed inflation concerns and the economic strain from surging energy prices. Governor Anna Breman recently signaled that the central bank may look through temporary energy-driven inflation but could hike rates if long-term inflation expectations are threatened.

The New Zealand dollar fell to $0.570, hitting its lowest level since November 2025, as expectations for a swift resolution to the Middle East conflict waned. US President Donald Trump, in a prime-time address on Thursday, offered little clarity on the path to ending the war he claimed would conclude soon, while warning that US forces could continue operations in Iran for the next two to three weeks. The Reserve Bank of New Zealand recently warned that rising oil prices, driven by the conflict, could push inflation higher and weigh on household spending. Governor Anna Breman noted that the central bank would look through short-term inflationary impacts but signaled that persistent energy-driven inflation could prompt future rate hikes. The central bank is expected to stand pat at its meeting next week, with the probability of a May rate hike falling sharply to 25% from 60% last week. The kiwi has fallen 0.6% so far this week and is on track for its second consecutive weekly decline.