Forex News: NZ Dollar Falls Amid Risk-off Mood

NZ Dollar Falls Amid Risk-off Mood

(RTTNews) - The New Zealand dollar weakened against other major currencies in the late Asian session on Wednesday, as Asian markets traded lower, as surging crude oil prices renewed global inflationary pressures amid the re-escalation in the Middle East conflict following the U.S. rejection of Iran's peace proposal. Hotter-than-expected US inflation data also reinforced expectations for tighter U.S. Fed policy.

The Fed could keep interest rates elevated for longer, while lingering uncertainty over US-Iran peace talks and surging crude oil prices tied to the Middle East conflict continued to weigh on sentiment.

The U.S. also reported the fastest annual rate of consumer price growth since May 2023, making any rate cuts in the near future extremely unlikely.

The U.S. and Iran struggle to reach an agreement to end the war and reopen the critical Strait of Hormuz. This standoff could lead to the restart of combat operations by the U.S. Iran has warned that it was ready to respond to any U.S. aggression.

In economic news, the outlook for inflation in New Zealand has changed, with one-year predictions rising to 3.41% and two-year projections rising to 2.53% for Q2 2026. The Reserve Bank of New Zealand's (RBNZ) attempts to strike a balance between price stability and economic recovery have been hampered by these growing numbers as well as high oil costs brought on by continuous disruptions in the Strait of Hormuz. Because energy-driven inflation is still a major concern, markets have completely factored in a rate hike for July.

RBNZ Governor Anna Breman recently reported that core inflation remained within the target range during the first quarter despite these pressures. Investor expectations for a rate hike in May were lowered as a result of this stability, which temporarily reduced market bets.

In a pre-Budget statement, New Zealand Prime Minister Christopher Luxon reiterated the government's long-term fiscal policy. Prior to the May 28 Budget, Luxon reaffirmed a goal to decrease national debt to 40% of GDP and pledged to achieve a budget surplus by 2028-2029. Luxon confirmed a goal to lower the national debt to 40% of GDP and pledged to achieve a budget surplus by 2028-2029 prior to the May 28 Budget.

In the Asian trading today, the NZ dollar fell to a 2-day high of 1.2189 against the Australian dollar, from an early high of 1.2143. The kiwi may test support near the 1.20 region.

Against the U.S. dollar, the kiwi dropped to 0.5936 from an early high of 0.5952. On the downside, 0.58 is seen as the next support level for the kiwi.

Against the yen and the euro, the kiwi edged down to 93.65 and 1.9760 from early an early more than a 2-week high of 94.04 and a 6-day high of 1.9680, respectively. If the kiwi extends its downtrend, it is likely to find support around 92.00 against the yen and 2.00 against the euro.

Looking ahead, Eurozone employment data for the first quarter, industrial production for March and GDP data for the second quarter are slated for release in the European session at 5:00 am ET.

In the New York session, U.S. MBA weekly mortgage rate data, U.S. PPI for April, U.S. EIA crude oil data and Germany current account data for March are set to be published.

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