New Zealand Dollar Hovers Near Multi-Month Highs

The New Zealand dollar traded near a three-month high at around $0.597 on Wednesday, after settling higher in the previous session as signs of progress in Middle East negotiations improved risk sentiment. Iran and Oman discussed plans to establish a temporary transit corridor through the Strait of Hormuz, along with a project to clear mines from the waterway, while Pakistan reported significant progress in talks with Tehran aimed at ending the war. The developments eased concerns over prolonged disruptions to shipping through the strait. Also supporting the kiwi, the Reserve Bank of New Zealand is widely expected to deliver another 25-basis-point rate hike at its meeting next week, with the policy rate seen reaching 3.0% by year-end. However, weak retail sales data released earlier this week has raised fresh questions about the extent to which the central bank can continue tightening policy.

The New Zealand dollar hovered around $0.595 on Tuesday after falling 0.4% in the previous session, as escalating tensions between the US and Iran weighed on market sentiment. Treasury Secretary Scott Bessent said on Monday the US was expanding the scope of commercial activities that could be subject to secondary sanctions across five sectors of the Iranian economy, while also imposing new sanctions on nearly 60 entities, individuals, and vessels allegedly supporting Iran’s oil revenues, weapons procurement, and cyber activities. The kiwi also faced pressure from weak domestic retail sales data, which pointed to softer consumer demand and raised concerns about the strength of the economic recovery, potentially reducing the scope for further monetary tightening. Nevertheless, the Reserve Bank of New Zealand is widely expected to raise interest rates again in September, as inflation remains elevated.

The New Zealand dollar fell to around $0.596 on Monday, easing from nearly three-month highs as risk sentiment weakened ahead of the US announcement of new sanctions against Iran. Treasury Secretary Scott Bessent said last week that Washington intends to collapse Iran with what he described as the “toughest sanctions in history.” Tehran, however, dismissed the threats as a sign of desperation, saying the new sanctions would fail to defeat the country. On the data front, New Zealand retail sales fell 0.5% in the June quarter, missing expectations for a 0.1% gain and reversing a 1% increase in the previous quarter. This points to weakening consumer demand, raising concerns about the country’s economic recovery and potentially limiting the scope for further rate hikes. Still, the Reserve Bank of New Zealand is widely expected to raise interest rates again in September as inflation remains elevated.