New Zealand Dollar climbs to highest since June as US Dollar weakens
NZD/USD extends its advance on Friday and trades around 0.5980 at the time of writing, up 0.62% on the day. The pair reached its highest level since early June and is heading for a solid weekly performance, mainly supported by persistent weakness in the US Dollar (USD).
The New Zealand Dollar (NZD) has reached its highest level since early June, climbing to around 0.5980 against the US Dollar (USD), marking a 0.62% gain for the day. This upward trend is largely driven by the weakening US Dollar, as evidenced by the US Dollar Index's (DXY) 0.23% loss to 98.65. Investors are pulling back from expectations of an immediate interest rate hike by the Federal Reserve (Fed), as indicated by the Federal Open Market Committee (FOMC) minutes, which suggested further tightening could be needed if inflation remains insufficient.
The Reserve Bank of New Zealand (RBNZ) is expected to raise interest rates again, providing a favorable environment for the NZD. Despite New Zealand's July trade deficit of NZ$1,949 million, the focus remains on monetary policy developments and the US Dollar's performance. Geopolitical tensions, such as the ongoing US-Iran conflict and rising energy prices, could hinder the Greenback's decline.
The upcoming S&P Global US Purchasing Managers Indices (PMIs) for August will provide further insight into the US economy. Weak PMI data could strengthen the case for a weaker USD and support the NZD. Analysts at MUFG note that leveraged short positions in the NZD have hit a record high, suggesting strong speculative selling, while the RBNZ's accommodative policy rate may continue to favor the NZD.
The NZD/USD pair is currently trading near key moving averages and support levels, indicating a bullish near-term outlook, despite some signs of potential profit-taking.
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