The New Zealand dollar hovered near $0.598 on Tuesday after touching a three-month low of $0.595 in the previous session. The currency remains under pressure as the Reserve Bank of New Zealand (RBNZ) is widely expected to implement substantial interest rate cut following the return of inflation to target levels.
RBNZ Rate Cut Anticipated
With inflation stabilizing, markets are increasingly betting on aggressive policy easing from the RBNZ, with many pricing in a 50-basis-point rate cut at its November meeting, while some anticipate a 75-basis-point reduction. Such moves could lower borrowing costs further, putting additional downward pressure on the Kiwi dollar as investors adjust for a more dovish RBNZ stance.
External Factors Providing Some Support
The New Zealand dollar has found modest support from a weaker U.S. dollar, which softened as tensions in the Middle East eased following a limited Israeli retaliatory response to Iran. This relative calm has reduced safe-haven demand, slightly lifting risk-sensitive assets like the Kiwi.
However, traders remain cautious as they await key U.S. economic data releases later this week, including the core PCE inflation reading and nonfarm payrolls report, which could influence the Federal Reserve’s monetary policy trajectory and potentially impact the New Zealand dollar.
