The New Zealand dollar hovered around $0.567 on Thursday, near an eleven-week low, as a strong US dollar continued to weigh on the kiwi. The greenback climbed to its highest level in nearly two months after stronger-than-expected PMI data heightened inflation concerns and reinforced expectations of further US interest rate hikes.
Even ahead of the data release, several Federal Reserve officials had highlighted persistent inflation risks and indicated that additional rate increases are likely. This hawkish Fed stance overshadowed growing expectations for further tightening by the Reserve Bank of New Zealand.
Markets are now assigning an 87% probability that the RBNZ will deliver a third consecutive hike in October, following Governor Anna Breman’s warning that sustained increases in oil prices could push near-term inflation above the bank’s latest projections. However, her emphasis on an uneven economic recovery underscored the difficulty of balancing elevated inflation risks against still-fragile domestic growth.
