Dollar Soars on Inflation Fears, Kiwi Takes a Hit

The US dollar has strengthened to a two-week high as investors become increasingly worried about inflation. Rising oil prices and growing expectations of a September Federal Reserve rate hike have contributed to this trend.

The dollar's haven appeal was further reinforced by rising Treasury yields, which now stand at their highest levels since 2008.

In contrast, the New Zealand dollar has taken a hit after the Reserve Bank of New Zealand (RBNZ) raised its official cash rate by 25 basis points to 2.75%, as expected. However, analysts noted that the policy track does not point to another increase in October and that the language around future decisions was deliberately vague and highly conditional.

The kiwi has fallen to its lowest level since August 13, despite the RBNZ's rate hike. The ANZ analysts said that 'with an October hike now seen as less likely, wholesale rates and the NZD moved lower.'