New Zealand Dollar Hovers Near 3-Week Low

The New Zealand dollar edged up to $0.583 but remained close to a three-week low, as traders weighed the domestic policy outlook and external developments. While investors continue to expect tightening from the RBNZ, bets on a rate hike in May eased to 45% from over 60% earlier this week after Governor Anna Breman indicated that first-quarter measures of core inflation remained stable within the central bank’s 1-3% target range. Further weighing on sentiment, data showed that New Zealand’s business confidence turned negative in April for the first time since 2023, as the Middle East conflict weighed on expectations for profits and sales. On geopolitics, President Trump opted to maintain a blockade on Iran's ports until a nuclear deal is reached, keeping investors on edge. Meanwhile, the Federal Reserve held interest rates steady as expected, though the decision was accompanied by hawkish dissent from several officials. Still, the kiwi is on track for a monthly gain of more than 1%.

The New Zealand dollar fell for a second straight session on Wednesday to $0.586, as investors digested comments from Reserve Bank of New Zealand Governor Anna Breman. Breman said first-quarter measures of core inflation remained stable within the central bank’s 1-3% target range, while emphasizing that policymakers remain focused on balancing inflation control while supporting an economic recovery. She also stressed that the RBNZ is prepared to act decisively and in a timely manner should short-term price pressures begin to feed into more persistent inflation. Investors responded by scaling back expectations of an early rate hike in May, with the probability falling to 45% from more than 60% earlier this week. Externally, attention is fixed on the Federal Reserve’s policy outcome due later today, with the bank widely expected to stand pat. Meanwhile, traders are awaiting President Trump’s response to Iran’s new proposal to reopen the Strait of Hormuz.

The New Zealand dollar fell to $0.588 on Tuesday, snapping a two-day winning streak, amid reports that President Trump was dissatisfied with Iran’s latest proposal, dampening hopes for a breakthrough in efforts to reopen the Strait of Hormuz. The proposal includes reopening the strait in exchange for the US lifting its blockade on Iranian ports, while talks over Tehran’s nuclear program would be deferred to a later stage. Traders also await the Federal Reserve’s policy decision, where the bank is widely anticipated to hold interest rates steady. On the domestic front, markets are pricing in more than a 60% chance of a rate hike from the Reserve Bank of New Zealand in May following a hot inflation report for the first quarter, with price pressures expected to intensify further in the second quarter as the full impact of higher energy costs feeds into the data. However, there remains some caution, as the Middle East conflict threatens to derail the country’s fragile economic recovery.