NZ Dollar Pressured by Fed Concerns

The New Zealand dollar traded near $0.63, holding a sharp decline after better-than-expected US services activity data suggested that the Federal Reserve could raise interest rates for longer.

Meanwhile, the kiwi recently scaled its highest levels in nearly four months on expectations that the Fed would slow the pace of interest rate hikes and on China’s softening stance against Covid.

Last month, the Reserve Bank of New Zealandalso delivered a supersized 75 basis point rate hike to get ahead of inflation and projected rates to peak at 5.5% in September 2023, much higher than a previous forecast of 4.1%.

That was the biggest increase since the RBNZ introduced the OCR in 1999 and brought the policy rate to a 14-year high of 4.25%.

Stubbornly high inflation and near-record low unemployment in New Zealand supported the case for a more aggressive move from the RBNZ.