NZD Surges to Multi-Week High as Fed Rate-Hike Bets Fade

The New Zealand Dollar (NZD) has extended its rally against the US Dollar (USD), reaching a fresh multi-week high as investors scale back expectations of further Federal Reserve interest rate hikes. The shift in market sentiment has weighed on the greenback, making risk-sensitive currencies like the NZD more attractive.

The US Dollar's decline is largely due to softening inflation figures and a cooling labor market, which have reinforced the view that the Fed's tightening cycle may be over. Market participants now see a 68% probability of no rate change at the next FOMC meeting, up from 44% a month ago.

The NZD has also benefited from domestic factors, including the Reserve Bank of New Zealand's (RBNZ) hawkish stance and stronger-than-expected dairy prices. Improved economic prospects in China, New Zealand's largest trading partner, have further lifted demand for antipodean currencies.