New Zealand Dollar Edges Higher

The New Zealand dollar edged higher to around $0.595 on Thursday, after falling 0.5% in the previous session as the US dollar advanced following a batch of economic data. US inflation and other economic indicators released on Wednesday slightly increased expectations for a Federal Reserve rate hike, with traders now awaiting Fed Chair Kevin Warsh’s first speech at the Jackson Hole symposium on Friday for clues about the Fed’s September policy decision. Still, the kiwi remained supported by expectations that the Reserve Bank of New Zealand will deliver another 25-basis-point rate hike at its meeting next week, with the policy rate seen reaching 3.0% by year-end. Meanwhile, risk sentiment improved following an agreement between Iran and Oman on the sharing of control and revenues from the Strait of Hormuz.

The New Zealand dollar fell back to around $0.595 on Wednesday after gaining 0.3% in the previous session on signs of progress in Middle East negotiations. The kiwi struggled to sustain recent gains driven by improved risk sentiment following Pakistan’s announcement of significant progress in talks with Tehran aimed at ending the war. Iran and Oman also discussed plans to establish a temporary transit corridor through the Strait of Hormuz, along with a project to clear mines from the waterway. On the domestic policy front, 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 concerns about the strength of the country’s economic recovery, potentially limiting the scope for further rate increases.

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.