NZD Plunges as USD Strength Gains Momentum Amid Fed Expectations and Higher Yields
The New Zealand Dollar (NZD) has been struggling in recent weeks, with the NZD/USD pair trading near its late-June lows. The US Dollar (USD) has been gaining strength due to rising expectations of additional Federal Reserve tightening and higher US bond yields.
Data from CME Group's FedWatch Tool shows that market participants are pricing in an over 65% probability that the Fed will raise interest rates again in October, following the recent 25 basis points hike. This has contributed to a sharp move higher in US bond yields, with the yield on the benchmark 10-year US Treasury note reaching a new high since July 2007.
The uncertainty surrounding the resolution of the US-Iran conflict is also maintaining a geopolitical risk premium, favoring the safe-haven Greenback. This combination of factors has led to a sustained downtrend in NZD/USD, which appears positioned to extend its downward move toward the year-to-date low near 0.5625.