New Zealand Dollar edges higher on softer US yields, Fed hike bets cap recovery
NZD/USD trades around 0.5605 on Friday at the time of writing, posting a modest gain of 0.06% on the day, but more broadly continuing to consolidate near its recent lows.
The New Zealand Dollar (NZD) experienced a slight increase to 0.5605 against the US Dollar (USD) on Friday, marking a modest 0.06% gain for the day. This improvement was driven by a temporary drop in US Treasury yields and a decline in oil prices. However, the strengthening US Dollar limited the NZD's upside potential. The positive sentiment was fueled by a successful US 30-year Treasury bond auction on Thursday, which led to lower yields and alleviated geopolitical concerns.
Despite this, the NZD's recovery remains uncertain due to the Federal Reserve's (Fed) interest rate hikes and the persistent strength of the USD. Market analysts predict that the Fed will keep interest rates steady at 3.75%-4.00% during their October 27-28 meeting, with an 85% probability of a hike in December. Additionally, the latest US economic data showed a decline in consumer sentiment and a rise in inflation expectations, further challenging the NZD/USD pair's recovery prospects.
On the New Zealand side, the Reserve Bank of New Zealand (RBNZ) has maintained its official cash rate at 2.75%, significantly lower than the Fed's benchmark rate, which favors the USD and reduces the appeal of the Kiwi currency. Technical analysis indicates that the NZD/USD pair remains bearish in the short term, trading below key support levels such as the 100-period and 200-period simple moving averages.
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