NZD Falls 0.38% Amid US-Iran Tensions, RBNZ Hike Expectations Support Kiwi
The New Zealand Dollar (NZD) fell by 0.38% against the US Dollar on Tuesday, trading around 0.5880 at the time of writing. The decline was due in part to rising tensions between the United States and Iran, which fueled risk aversion and demand for the US Dollar.
US President Donald Trump has stated that he is not interested in renewing the expiring agreement with Iran and has reiterated his intention to place the strategic waterway under US control. This move has heightened concerns about a further escalation in tensions between Washington and Tehran.
The New Zealand Dollar, which is generally sensitive to changes in risk appetite, was weighed down by the deteriorating market sentiment. However, expectations that the Reserve Bank of New Zealand (RBNZ) could raise its policy rate by 25 basis points at next month's meeting provided some support for the Kiwi.
According to Commerzbank, positive figures for monthly aggregate credit and debit card sales suggest that the economy will not suffer too severe a setback. However, analysts at BNY Mellon continue to doubt the current market pricing of interest rates expectations, where two more Reserve Bank of New Zealand (RBNZ) hikes are expected by year end.
The US Dollar's advance could remain limited by fading expectations of monetary tightening from the Federal Reserve (Fed). The unexpected weakness in July US Nonfarm Payrolls and moderate consumer inflation figures weaken the case for an imminent interest rate hike. Markets now price in a 35% chance of a rate hike at the Fed's next meeting, down from 47% a month earlier.