Kiwi and Aussie currencies await crucial rate hikes in New Zealand and Australia

The New Zealand dollar is bracing for an interest rate hike by the Reserve Bank of New Zealand (RBNZ) on Wednesday, which is widely expected to raise the rates by a quarter-point to 2.75%. The kiwi dollar has support at $0.5860 and $0.5821 levels and is set to end August 0.6% higher.

Oil prices climbed over 2% on Monday as fresh fighting broke out between the US and Iran, fuelling inflation risks. Francesco Pesole, a FX strategist at ING, sees downside risks for the NZD around this meeting, given the high hurdle for the RBNZ to validate market pricing.

The Reserve Bank of Australia (RBA) is also expected to hike interest rates as markets wager on a 56% probability that it will raise rates for a fourth time next month. However, Paul Bloxham, chief economist at HSBC, notes that the RBA has no easy choices from here and may have to choose between hiking further or risking pushing the economy into a bigger downswing.