Forex News: NZ Dollar Rises As RBNZ Signals Rate Hike

NZ Dollar Rises As RBNZ Signals Rate Hike

(RTTNews) - The New Zealand dollar strengthened against other major currencies in the European session on Friday, as investors signaled rate hike by the Reserve Bank of New Zealand's (RBNZ).

The Official Cash Rate (OCR) is expected to rise sooner and more than previously anticipated, according to RBNZ Governor Anna Breman, who made this announcement early on Friday. She cited weaker growth, increased input costs in New Zealand and its trade partners, and inflation exacerbated by the Middle East war.

At its May meeting on Wednesday, the New Zealand central bank maintained its OCR at 2.25%. Three board members voted to keep interest rates the same, while three supported a quarter-point increase. The New Zealand rate forecast has been repriced by markets, and traders now anticipate further increases until early 2027.

The U.S. Personal Consumption Expenditures (PCE) Price Index inflation data for April indicates that price rise in the U.S. is still high, which supports predictions that the Fed will continue to be cautious when it comes to interest rates. According to the CME FedWatch tool, traders are currently pricing in a nearly 36.6% possibility that the Fed will raise interest rates by 25 basis points (bps) by year's end.

European stock markets traded higher after reports emerged the United States and Iran have agreed in principle to extend their ceasefire by 60 days.

According to the tentative agreement, pending final approval from U.S. President Donald Trump, Iran would not be able to impose tolls on ships transiting the Strait of Hormuz, while the U.S. would gradually lift its sea blockade on Iranian ports.

In the European trading today, the NZ dollar rose to nearly a 2-year high of 95.04 against the yen and more than a 2-week high of 0.5967 against the U.S. dollar, from early lows of 94.66 and 0.5942, respectively. If the kiwi extends its uptrend, it is likely to find resistance around 96.00 against the yen and 0.60 against the greenback.

Against the euro and the Australian dollar, the kiwi climbed to nearly a 4-month high of 1.9501 and nearly a 2-month high of 1.1990 from early lows of 1.9609 and 1.2053, respectively. The kiwi may test resistance around 1.97 against the euro and 1.18 against the aussie.

Looking ahead, German CPI data for May, Canada GDP data for the first quarter, U.S. goods trade balance for April, retail and wholesale inventories for April, U.S. Chicago PMI for May and U.S. Baker Hughes oil rig count data are slated for release in the New York session.

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