NZD Weakens on Escalating Middle East Tensions

The New Zealand dollar (NZD) has weakened to near 0.5875 against the US dollar in early European trading on Wednesday, but remains supported above its 100-day simple moving average.

This comes as escalating tensions in the Middle East have boosted the safe-haven value of the US dollar and created headwinds for the NZD/USD pair.

Iran's Chief of Staff Major General Ali Abdollahi warned Persian Gulf states against providing assistance to the US military, suggesting increased regional volatility could weigh on risk assets like the New Zealand dollar.

However, Scotiabank analysts led by Shaun Osborne noted that benign inflation and softness in the US labor market make a September Federal Reserve rate hike 'highly unlikely', which could cap the NZD/USD pair's downside.