Rising US Yields Outweigh NZ Interest Rate Hopes
The New Zealand Dollar has weakened against its US counterpart as market expectations for a potential interest rate hike by the Reserve Bank of New Zealand (RBNZ) are outweighed by rising US yields.
On September 2, the RBNZ raised its Official Cash Rate to 2.75%, with projections indicating a pause in October and a hike in December. However, markets now price about an 80% chance of a hike to 3% on October 28.
The US Federal Reserve's interest rate range of 3.75-4.00% means that even at 3%, the OCR would be three-quarters of a point below the Fed's range, maintaining a negative rate gap for the Kiwi. An October hike would reduce this gap from one full point to three-quarters of one.
The upcoming US economic data releases, including the Institute for Supply Management (ISM) survey and Nonfarm Payrolls, are expected to have a significant impact on NZD/USD due to their influence on US yields.