Kiwi Dollar Bounces Back Amid Rate Hike Expectations

The New Zealand dollar rebounded on Friday after an overnight dip, despite data showing a sharp decline in one-year inflation expectations. The kiwi rose 0.2% to $0.5865, having fallen 0.1% the previous day to as low as $0.5822.

Market participants are still betting heavily on a September rate hike by the Reserve Bank of New Zealand (RBNZ), with around 85% pricing in this move. This is partly due to the RBNZ's repeated warnings that it needs to make policy less stimulative.

Data released showed that New Zealand's manufacturing activity continued to expand in July, and the RBNZ maintained its loan-to-value ratio settings despite weakness in the housing market.