NZD Hits Two-Month Low as Oil Prices Volatility Continues

The New Zealand dollar (NZD) has started the week by underperforming and reaching a two-month low of below 0.5760 before recovering to around 0.5785.

This weakness in the NZD can be attributed to both the Reserve Bank of New Zealand's (RBNZ) easy policy stance, which is seen as not doing enough to tackle inflation, and the strength of the US dollar, which is broadly stronger at present.

Oil prices have been a major driver of market volatility this week, with Brent crude reaching an overnight high of USD 110 per barrel before falling back below USD 105. The sharp movements in oil prices are due to supply concerns following Saudi Arabia's decision to close its East-West pipeline due to ongoing attacks.

The US 10-year Treasury yield briefly surged above 5% but quickly fell back, currently trading at around 4.96%. The market is still pricing in a Fed rate hike later this week and expects the tightening cycle to extend well into next year.