The New Zealand dollar hovered near a three-month high around $0.597 on Wednesday, extending gains from the previous session as improving prospects for a diplomatic breakthrough in the Middle East bolstered risk sentiment. Pakistan said on Tuesday that it had made substantial progress in talks with Iran aimed at ending the conflict, while Tehran and Oman discussed establishing a temporary transit corridor through the Strait of Hormuz, alongside a mine-clearing project in the key waterway. These developments eased fears of prolonged shipping disruptions in the strait.
The kiwi was also supported by expectations that the Reserve Bank of New Zealand will deliver another 25-basis-point interest rate increase at its meeting next week, with markets anticipating the policy rate to reach 3.0% by the end of the year. However, weaker-than-expected retail sales data released earlier this week have raised fresh doubts about how far the central bank can continue tightening monetary policy.
