Kiwi Tumbles as Geopolitics Boosts Safe-Haven Demand

The New Zealand dollar came under pressure on Friday, August 7, as the US dollar strengthened and risk aversion intensified. The kiwi traded around 0.5865 against its American counterpart after a stronger greenback saw the U.S. Dollar Index rebound to approximately 100.00.

Despite oil prices surging over 3% due to geopolitical risks, this typically supportive factor failed to lift the NZD as expectations of slowing Chinese trade data and cautious sentiment ahead of the US nonfarm payrolls report weighed on its upside potential.

The U.S. Dollar Index rose 0.26% on Thursday, recouping some losses from earlier in the week, driven by safe-haven flows back into the dollar following news that Iran was considering a proposal to ban vessels from the U.S., Israel, and other 'hostile' countries from transiting the Strait of Hormuz.

Kansas City Fed President Jeffrey Schmid struck a hawkish tone on Thursday, stating that AI-related investments are exacerbating inflationary pressures and further monetary tightening will be necessary to bring inflation back to the 2% target.