New Zealand Dollar remains under pressure, RBNZ rate hike bets cushion losses
NZD/USD trades around 0.5655 at the time of writing on Thursday, down 0.30% on the day. However, the pair limits its losses as the New Zealand Dollar (NZD) benefits from a sharp increase in expectations of further monetary tightening by the Reserve Bank of New Zealand (RBNZ).
The New Zealand Dollar (NZD) continues to face downward pressure, with the Reserve Bank of New Zealand (RBNZ) rate hike predictions providing some relief. On Thursday, NZD/USD was trading at around 0.5655, down 0.30% for the day. However, the currency's value was bolstered by a surge in expectations of additional monetary tightening by the RBNZ.
Currently, there is an 87% probability of a third rate hike in October, up from just 20% earlier in the month. This shift in market sentiment, sparked by remarks from RBNZ Governor Anna Breman, has helped to mitigate some of the NZD's losses, despite the broader market conditions remaining favorable to the US Dollar (USD). The NZD remains under pressure from the USD's strength, as US Treasury yields have risen sharply, reaching their highest level since 2007, with the 10-year yield at 5.16% and the 2-year yield near 4.91%.
This rise in yields follows strong US economic data, such as the S&P Global Composite Purchasing Managers Index (PMI) increasing to 58.4 in September, its highest level in five years, and the US labor market data showing initial jobless claims at 197K, below the expected 201K. Despite the positive sentiment towards NZD, it is still being weighed down by the strength of the USD and rising US Treasury yields.
NZD/USD currently sits at 0.5657, below both the 100-period and 200-period simple moving averages, and is capped by nearby horizontal resistance at 0.5686. A move above this level could provide some relief, with the next barrier at 0.5735.
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