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NZ dollar slides versus dollar as safe-haven demand rises
NZD/USD traded around 0.5880 in European hours, while expectations for the next Fed hike fell to 35% from 47% a month ago.
The New Zealand dollar weakened against the US dollar after two straight sessions of losses, with NZD/USD changing hands around 0.5880 during European hours on Tuesday, as investors leaned toward the greenback on safe-haven demand, FXStreet reported.
The outlet linked the move to rising geopolitical tensions between the United States and Iran. US President Donald Trump said he has no interest in renewing the expiring Iran agreement, pointing to an active naval blockade of Iranian ports as leverage and signaling he intends to declare the waterway as total American territory, which added to risk aversion.
At the same time, the dollar’s upside may be limited by fading hawkish expectations for the Federal Reserve. FXStreet cited CME FedWatch Tool data showing the probability of a Fed rate hike at the next meeting fell to 35%, down from 47% a month ago, after a surprise decline in July US nonfarm payrolls and modest consumer price inflation.
FXStreet also noted that NZD downside could be cushioned by expectations the Reserve Bank of New Zealand will deliver another 25 basis point rate hike next month, after repeated signals that policy needs to become less accommodative. It referenced commentary from Commerzbank’s Volkmar Baur that Stats NZ’s monthly Selected Price Index fell to 3.5% year over year in July from 4.9% in June, supporting expectations of a potential policy pause after the July hike despite ongoing Middle East risks.