NZD Bounces Back from Two-Week Low as Fed Rate Hike Bets Fizzle Out

The New Zealand Dollar (NZD) rebounded from its two-week low against the US Dollar (USD) on Tuesday, as diminishing expectations for further Federal Reserve rate hikes weighed on the greenback.

Recent economic data, including softer inflation figures and a cooling labor market, has reinforced the view that the Fed may be done with its tightening cycle. As of mid-week, futures markets implied a near-zero probability of a hike at the next Federal Open Market Committee (FOMC) meeting, according to CME Group's FedWatch tool.

The shift in expectations has reduced the yield advantage that US assets previously offered, making currencies like the New Zealand Dollar more attractive. The NZD, which is often sensitive to global risk sentiment and commodity prices, has also found support from improving dairy prices, a key export for New Zealand.