New Zealand Dollar Trades at 3-Week High

The New Zealand dollar hovered around $0.565 on Monday, its highest level in three weeks, as investors looked ahead to this week’s third-quarter inflation report for further clues on the Reserve Bank’s policy outlook. Data released today showed the services sector expanded for a fourth consecutive month in September, albeit modestly, while the trade deficit widened more than expected in, pointing to a mixed economic picture. Markets are largely pricing in a third consecutive rate hike later this month, which would lift the policy rate to 3%. Last week, RBNZ Chief Economist Paul Conway said the late-October decision remained open, adding that the central bank still viewed a higher official cash rate as the most likely next move, but had not decided on the timing. The inflation report will therefore be crucial in assessing whether further tightening is warranted.

The New Zealand dollar rose to $0.565 on Friday, extending its rebound from an 18-month low as the US dollar weakened amid falling Treasury yields. The kiwi is also supported by growing expectations of another rate hike from the Reserve Bank of New Zealand, with markets pricing in an 86% chance of a third increase to 3% on October 28. On Thursday, Chief Economist Paul Conway said the rate decision later this month remains open and that the central bank continues to believe that an increase in the OCR is most likely, although the timing remains uncertain. Meanwhile, data released today showed that New Zealand's electronic retail card spending fell 0.4% month on month in September, while food inflation accelerated to 2.4%, highlighting persistent price pressures. Market attention now turns to next week’s third-quarter inflation data for further clues on the monetary policy outlook. The kiwi has gained about 0.6% this week, on track to snap a seven-week losing streak.

The New Zealand dollar rose to $0.561 on Thursday, having fallen to as low as $0.556 overnight, its weakest level since April 2025, after higher-than-expected US CPI data boosted the greenback. The report prompted traders to increase bets on another Federal Reserve rate hike later this month and a further increase in December. Domestically, while the Reserve Bank of New Zealand has resumed its monetary tightening cycle, the official cash rate remains notably lower than interest rates in several major economies, including the US and neighboring Australia, making the kiwi less attractive to yield-seeking investors. The currency has also been weighed down by a still-sluggish economy and ongoing political uncertainty. Investors will now focus on New Zealand’s third-quarter CPI report next week for clues on the interest rate outlook. The report will be the last major data release before the RBNZ’s next meeting on October 28.