New Zealand Dollar Languishes Near Multi-Month Lows

The New Zealand dollar steadied around $0.561, close to its weakest level since November 2025, and was on track for its longest streak of weekly losses since early 2025. The kiwi has been pressured by a strengthening US dollar and a sharp rise in oil prices, which is threatening New Zealand’s fragile economic recovery. While more expensive energy is adding to inflationary pressures and reinforcing expectations of further Reserve Bank of New Zealand rate hikes, it is also eroding household purchasing power and raising business costs, potentially weighing on domestic demand and growth. Political uncertainty ahead of November’s general election has also added another headwind for the currency. The kiwi was down about 0.8% this week, extending its losing streak to six weeks.

The New Zealand dollar dropped below $0.560, hitting its lowest level since November 2025, as broad-based US dollar strength continued to weigh on the currency. The greenback was supported by a sustained rise in US Treasury yields, with elevated oil prices fueling concerns over persistent inflation and reinforcing expectations for further rate hikes by the Federal Reserve. For the same reason, markets have also increased bets on another Reserve Bank of New Zealand rate hike at its October meeting. However, support from rising RBNZ rate expectations has been outweighed by the broader rise in US yields and expectations for tighter Fed policy, keeping the US dollar robust. The prolonged conflict in the Middle East and its inflationary impact also pose risks to New Zealand’s economic recovery, further weighing on sentiment toward the currency.

The New Zealand dollar edged up to $0.565 but remained near a three-month low and was on track for a monthly decline. The kiwi started September tough, partly as the Reserve Bank of New Zealand signaled a less hawkish rate outlook than markets had anticipated. It was further weighed down by a strengthening US dollar amid rising expectations for more Federal Reserve rate hikes. More recently, however, the spike in oil prices has increased upside risks to inflation, which prompted traders to ramp up bets on another rate hike at the RBNZ's next meeting in October. Governor Anna Breman also warned last week that persistently high oil prices could push near-term inflation above the central bank’s latest forecast. Meanwhile, data out today showed New Zealand’s business confidence weakened in September, dented by a surge in fuel prices, highlighting the challenges facing the economy. The kiwi has fallen more than 4% this month and about 0.4% over the quarter.