New Zealand Dollar Moves Lower

The New Zealand dollar fell to around $0.570 on Tuesday, its lowest level since July 8, as hawkish Federal Reserve commentary kept the US dollar firm. Chicago Fed President Austan Goolsbee and St. Louis Fed President Alberto Musalem indicated that further rate increases may be needed, citing persistent supply shocks and inflation remaining above the Fed’s target. The kiwi has also remained under pressure since the Reserve Bank of New Zealand raised its cash rate earlier this month while signalling that further tightening would be gradual. However, markets continue to price in another rate hike in October, with the recent surge in oil prices adding to upside risks to inflation. Meanwhile, traders are looking to a US-China summit later this week for signs of progress in relations between the world’s two largest economies. A positive outcome could lift global risk appetite and lend support to the kiwi, given New Zealand’s strong trade ties with China.

The New Zealand dollar traded around $0.571 on Monday, near a ten-week low, as traders looked to a US-China summit later this week for indications on the state of relations between the world’s two largest economies. Among the key areas under discussion are an extension of the current tariff truce, which is set to expire on November 10, further tariff reductions, agricultural purchases, and AI. Any positive developments could improve global risk sentiment and support the kiwi, given that China is New Zealand’s largest trading partner. The kiwi has been under pressure since the Reserve Bank of New Zealand raised its cash rate earlier this month but signalled a more gradual pace of future tightening. Still, markets largely expect the central bank to hike rates again in October, as the recent spike in oil prices has increased upside inflation risks. Meanwhile, a firmer US dollar, supported by expectations of more Fed rate hikes, has added to downward pressure on the kiwi.

The New Zealand dollar slipped to around $0.571 on Friday, moving back near a ten-week low after rising 0.3% in the previous session, as a firmer US dollar continued to weigh on the currency. The greenback clung to a seven-week high after the Federal Reserve hiked rates and signaled further tightening ahead. This outweighed support from better-than-expected domestic data. New Zealand’s GDP growth in the second quarter beat estimates, suggesting some resilience in economic activity despite the severe energy shock from US-Iran war. In addition, the country’s trade deficit for August was smaller than forecast, with export growth outpacing the increase in imports. Meanwhile, markets are pricing in a 60% chance that the Reserve Bank of New Zealand will raise its cash rate again to 3.0% at its October meeting. The kiwi was down around 1.6% so far this week, marking its fourth consecutive weekly decline.