NZD Slumps Despite Increased Hike Odds Amid Fed Rate Decision

The New Zealand Dollar (NZD) has been declining against the US dollar despite an increase in the odds of a rate hike by the Reserve Bank of New Zealand (RBNZ). As of October 28, markets price at least a 75% chance that the OCR will reach 3%, up from around 30% after the September 2 hike. The NZD/USD pair is trading just above 0.5650, its lowest since late June.

The RBNZ's decision to raise rates on October 28 comes as the US Federal Reserve is also expected to increase interest rates on the same day. This has led to a situation where a Kiwi rally on an RBNZ hike would have most of a day before the US decision lands, which could impact the NZD/USD pair.

The US bond yields have climbed to new highs, with 10-year Treasury yields topping 5.15% on Thursday, their highest since July 2007. This has put pressure on the Kiwi, making it difficult for it to gain on rates alone.