New Zealand Dollar Hovers Near 2-Week High

The New Zealand dollar slipped to around $0.569 but remained near a two-week high as markets looked ahead to the Reserve Bank's policy decision. The central bank is widely expected to raise the official cash rate by 25 bps to 2.50% later this week in what would be its first hike in more than three years, as inflationary pressures persist despite oil prices retreating near pre-war levels. Investors will pay close attention to the policy statement for clues on the pace of future hikes, with most economists anticipating one more move to 2.75% by September. The upcoming decision comes after the RBNZ's closely contested May meeting, where policymakers voted to keep rates unchanged after a split decision that required Governor Anna Breman to cast the deciding vote. The kiwi was further supported by a softer US dollar as disappointing jobs data reduced expectations of a near-term rate hike by the Federal Reserve.

The New Zealand dollar rose to around $0.572, on track for its first weekly advance in three after rebounding from a seven-month low, as the US dollar weakened. The greenback fell to a two-week low after a weaker-than-expected jobs report prompted investors to scale back bets on an imminent rate hike by the Federal Reserve. The kiwi also found support from expectations that the Reserve Bank of New Zealand will raise rates next week, with market pricing indicating about a 78% probability of a hike. However, economists remain divided, with some calling for a hold as the decline in oil prices reduced inflation risks. On this week’s data, business sentiment improved in June, suggesting the economy may not slow as much as initially feared, while consumer confidence also increased as inflation concerns linked to the earlier spike in oil prices quickly faded. So far this week, the currency has gained more than 1%.

The New Zealand dollar held at $0.567, hovering near its lowest level in seven months amid a firm US dollar, while investors assessed the Reserve Bank’s interest rate outlook. Markets continue to price in a rate hike from the RBNZ next week, although analysts have become more divided on whether such a move is necessary given the recent decline in oil prices. Meanwhile, latest data showed business confidence improved in June, suggesting the economy may be holding up better than earlier feared. Although local economists still expect a contraction in the second quarter, they anticipate a recovery thereafter as fuel and other costs ease. The kiwi dropped 5.2% in June, marking its largest monthly fall since December 2024, and declined 1.2% in the second quarter.