New Zealand Dollar Remains Under Pressure

The New Zealand dollar hovered near a seven-month low at around $0.564, weighed down by a broadly strong US dollar and growing concerns over the domestic growth outlook. Although the recent pullback in oil prices, following a US-Iran deal, has eased near-term inflation concerns, the broader economic damage from the earlier energy shock persists. Expectations for aggressive tightening by the Reserve Bank of New Zealand have been scaled back, with markets now pricing in roughly a 66% chance of a July rate hike, down from over 80% a few weeks earlier, and anticipating just two moves this year rather than three. Investors are now awaiting this week’s business and consumer confidence data for clues about the state of the economy, with the country’s four major banks forecasting that the economy contracted in the second quarter.

The New Zealand dollar traded around $0.564, its lowest level since November 2025, as the sustained strength of the US dollar continued to weigh on the currency. The kiwi has been particularly affected by the US Federal Reserve's hawkish stance, which has further boosted the greenback. Investor risk appetite has also weakened amid a reversal in sentiment toward semiconductor and AI-related stocks, contributing to broader market declines. Moreover, falling oil prices amid progress in US-Iran talks reduced inflation concerns, prompting investors to pare back expectations of interest rate hikes from the Reserve Bank of New Zealand. A July increase is now priced at 66%, down from more than 80% the previous week, with only two moves seen this year instead of three. The kiwi has fallen more than 1% so far this week and is on track for a second consecutive weekly loss.

The New Zealand dollar fell to around $0.570, the lowest in 2-1/2 months, as a firm US dollar outweighed easing Middle East tensions. The greenback strengthens amid increased bets on a US rate hike following the Federal Reserve’s hawkish signals. Meanwhile, US–Iran talks in Switzerland have made encouraging progress, with technical-level discussions set to continue this week, easing earlier concerns after President Donald Trump again warned of strikes on Iran over its support for Hezbollah. New Zealand’s GDP data released last week suggested that economic recovery was gaining momentum. However, the figures largely reflected conditions prior to the escalation in Middle East conflict. As a result, forecasts show GDP to barely grow or even contract in the second quarter. Markets continue to price in a 25-bps hike in July given the RBNZ’s hawkish outlook, though swap pricing imply only two increases this year rather than the three previously expected.