Oil Shock Trumps RBNZ Hike as Kiwi Dollar Tanks on Hormuz Tensions

The Reserve Bank of New Zealand (RBNZ) raised interest rates by 25 basis points to 2.75% in a unanimous vote on Tuesday, but this move did not have the expected bullish effect on the Kiwi dollar.

Instead, the NZD fell below 0.5830, which is surprising given that both the NZD and AUD are commodity currencies and should move together. However, RBNZ's signals of gradual tightening rather than aggressive hiking were interpreted by the market as 'we're going slow', leading to a sell-off.

The real story driving the markets, however, was the surge in oil prices due to escalating tensions between the US, Iran, and Israel. Brent crude blasted through $95 and touched $97, while WTI jumped above $91 for the first time since late July. This break of a technical channel that held for months is seen as a confirmation of the breakout.