NZD Slips as USD Strengthens on Middle East Tensions and Fed Hike Bets
The New Zealand Dollar (NZD) slipped on Monday as the US Dollar (USD) strengthened due to rising Middle East tensions and expectations of a Federal Reserve interest rate hike. The NZD/USD pair, which had reached its monthly peak above 0.59 earlier last week, is now trading around 0.5880, down 0.20% for the day.
The recent US Nonfarm Payrolls report was initially seen as bearish, but the geopolitical risk premium has since taken over, supporting the safe-haven USD. The uncertainty surrounding the Strait of Hormuz and ongoing attacks by Iran-backed Houthi militants against Saudi energy infrastructure are driving up crude oil prices and fueling inflation fears.
Meanwhile, China's annual consumer inflation rate slowed to a six-month low in July, while producer price inflation eased more sharply than expected. This is contributing to the decline of antipodean currencies, including the NZD. However, the Reserve Bank of New Zealand's (RBNZ) hawkish stance could support the NZD and limit deeper losses for the pair.
Traders may be waiting for this week's US inflation figures before making their next move, which will provide more cues about the Fed's future policy path. The outlook, along with further developments surrounding the Middle East crisis, will drive USD demand and impact the NZD/USD pair.