Kiwi Dollar Edges Higher

The New Zealand dollar rose toward $0.58, as the US dollar softened after the Federal Reserve stood pat on rates, while upbeat business survey at home also provided support for the currency. The greenback declined after the Fed held its benchmark interest rate steady for the fifth consecutive meeting, despite persistent inflation pressures and a recent surge in energy prices. On the domestic front, the ANZ Business Confidence Index jumped to 56.1 in July from 36.6 in June, as firms became more optimistic about the economic outlook. However, sentiment weakened toward the end of the month as renewed fighting in the Middle East triggered volatility in oil prices. Markets continued to expect the Reserve Bank of New Zealand to raise its cash rate again at its September meeting, following higher-than-expected inflation data last week.

The New Zealand dollar traded around $0.578, moving sideways so far this week, with investors awaiting the US Federal Reserve's policy decision while monitoring developments in the Middle East. Although the consensus is for the Fed to hold rates steady, markets continue to price in roughly a one-third probability of a 25-bp increase. Meanwhile, geopolitical risks resurfaced after the US and Saudi Arabia carried out strikes against Iran-backed groups in Iraq, hours after Washington said it had intercepted Iranian missile attacks targeting US forces in the region. Investors are also looking ahead to New Zealand's business confidence and consumer sentiment data later this week for fresh clues on the economic outlook. The Reserve Bank of New Zealand is widely expected to deliver another 25-bp hike in September following hot inflation data last week, with markets implying rates to reach at least 3.0% by year-end and peak at 3.5% around mid-2027.

The New Zealand dollar edged down to around $0.576, its lowest level in two weeks, as a firm US dollar offset support from improved risk sentiment. The greenback held at a one-month high on lingering expectations of a Federal Reserve rate hike at this week's meeting. Meanwhile, a pause in hostilities between the US and Iran eased fears of a broader escalation in the conflict. President Donald Trump also said that the US was having "good talks" with Tehran and there was a chance of a deal, but he warned that US strikes would resume if negotiations failed. On the domestic policy front, the Reserve Bank of New Zealand is widely expected to deliver another 25-bp hike in September following hot inflation data last week, with markets implying rates to reach at least 3.0% by year-end and peak at 3.5% around mid-2027.