The New Zealand dollar traded near $0.571, a more than two-month low, pressured by a hawkish US Federal Reserve as investors also evaluated domestic GDP figures. The Fed lifted its benchmark interest rate for the first time in three years, to a target range of 3.75%-4.00%, and signaled that another increase was likely before year-end, supporting further strength in the US dollar.
Losses in the kiwi were partly limited after data showed New Zealand’s economy grew 0.2% in the three months to June, slightly above the 0.1% consensus forecast and the Reserve Bank’s expectation of flat growth. On an annual basis, GDP rose 2.6%, beating estimates of 2.2%. These readings pointed to a degree of resilience in economic activity despite the significant energy shock associated with the conflict in the Middle East.
Earlier this month, the RBNZ raised interest rates for a second consecutive meeting but signaled a less aggressive tightening trajectory. Even so, markets expect the official cash rate to reach 3.0% by December, as the recent surge in oil prices has heightened upside risks to inflation.
