NZD Hits Near Two-Month High on RBNZ Hawkishness, Soft U.S. Inflation

The New Zealand dollar (NZD) traded near its two-and-a-half-month high on Thursday, reaching around 0.5950 in early Asian trading. This move comes as the People's Bank of China (PBOC) kept its one-year and five-year Loan Prime Rates unchanged at 3.00% and 3.50%, respectively.

The Reserve Bank of New Zealand (RBNZ) has signaled further policy tightening, with swaps indicating up to three more rate increases through early 2027. This hawkish tone is supporting the NZD, as well as moderating U.S. inflation data that has tempered expectations for additional Federal Reserve tightening.

Market pricing for a September Federal Reserve rate hike eased, with the implied probability at 32.7%, down from 47% a month earlier. Strategists at BNY noted that the NZD is now trading slightly above its rolling 12-month average and expressed doubts about current market assumptions embedded in the rates curve.