New Zealand Dollar Rises to 2-Month High

The New Zealand dollar rose to around $0.589 on the first trading day of August, reaching a two-month high, as a fresh wave of yen buying weighed broadly on the US dollar, while fresh negotiations in the Middle East lifted risk appetite. The greenback extended its decline after Japan confirmed it had engaged in joint yen-buying intervention with the US on Friday. Meanwhile, President Donald Trump said new talks with Iran would begin on Monday after he canceled a weekend attack against Tehran, raising hopes for progress toward resolving the months-long conflict. Improving domestic sentiment, with New Zealand businesses and consumers becoming more optimistic, also underpinned the kiwi. Traders now await the country’s second-quarter jobs report for further clues on the state of the economy. Currently, markets are almost fully pricing in a quarter-point rate hike by the Reserve Bank of New Zealand in September.

The New Zealand dollar hovered around $0.587 on Friday, close to an eight-week high, supported by a softer US dollar and positive domestic economic news. The US dollar came under pressure following the Federal Reserve’s cautious policy stance and a suspected Japanese intervention in the forex market to support the yen. On the domestic front, the ANZ-Roy Morgan Consumer Confidence Index rose 8 points in July to 99.3, marking its highest level in five months and a significant recovery from the low reached in April. The survey was released a day after a business confidence survey from the same bank showed firms had also become more optimistic. However, ANZ Chief Economist Sharon Zollner noted that developments in the Middle East could continue to weigh on both business and consumer confidence as long as the situation remains volatile. Meanwhile, markets are almost fully pricing in a 25-bp rate hike by the RBNZ in September. The kiwi has gained more than 1% this week and over 3% in July.

The New Zealand dollar rose toward $0.588, reaching its highest level since early June, 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.