New Zealand Dollar Holds at 2-Week Low

The New Zealand dollar hovered around $0.585, its lowest level in two weeks, as the greenback firmed despite a subdued US consumer inflation report. The data reduced the likelihood of monetary policy tightening by the Federal Reserve at its September meeting, with traders having already trimmed their rate-hike bets following Friday’s weak jobs report. Investors also remained cautious as talks between the US and Iran appeared to have reached an impasse, with both sides hardening their positions, while President Donald Trump said the US has “total control” over the Strait of Hormuz. Domestically, however, the NZ dollar continues to draw support from expectations that the Reserve Bank of New Zealand will deliver another quarter-point rate increase next month.

The New Zealand dollar slipped to around $0.586 as the US dollar edged higher, with investors awaiting US inflation data for fresh clues on the Federal Reserve’s interest-rate path. A hotter-than-expected CPI reading could reinforce expectations for tighter US monetary policy, boosting the greenback. On the domestic front, markets remain set on a rate increase from the Reserve Bank of New Zealand in September after the central bank signalled that further tightening may be needed to remove monetary stimulus and keep inflation under control. However, last week’s soft jobs data has raised questions about how aggressively the RBNZ can continue raising rates. Meanwhile, uncertainty over the prospects for a Middle East peace deal that could reopen the Strait of Hormuz weighed on market confidence. In other news, NZ Prime Minister Christopher Luxon retained his position after a leadership vote among lawmakers from his own party, less than three months before the election.

The New Zealand dollar held near a more than two-month high at around $0.588, as the greenback stayed under pressure following a weak US jobs report. The US dollar hovered near a two-month low after a surprise contraction in the labour market in July reduced bets for a Federal Reserve rate hike in September, while investors awaited this week’s inflation data for further clues on the policy path. The kiwi dollar also continued to draw support from expectations that the Reserve Bank of New Zealand could raise interest rates next month after signalling at its latest meeting that further tightening may be required to remove monetary stimulus and bring inflation under control. However, last week’s soft jobs report raised fresh questions over how far the central bank will raise interest rates.