The New Zealand dollar strengthened toward $0.58, reaching its highest level in nearly two weeks, after the Reserve Bank of New Zealand left its official cash rate unchanged at 2.25%, as widely anticipated. The central bank struck a cautious tone, stating that developments in the Middle East have materially reshaped both the inflation outlook and the balance of risks. It now expects near-term inflation to rise, while forecasting a weaker economic recovery.
This pause comes after an aggressive easing cycle in which the RBNZ cut rates by a cumulative 325 basis points since August 2024 in response to slowing growth and moderating inflation. The New Zealand dollar also benefited from improved risk sentiment following an agreement between the US and Iran on a two-week ceasefire on Tuesday, reached less than two hours before President Donald Trump’s ultimatum to “obliterate” Iran was due to expire. As part of the deal, Tehran agreed to temporarily reopen the Strait of Hormuz.
