The New Zealand dollar weakened to around $0.588 on Friday and was set for a weekly decline, pressured by soft domestic manufacturing data. New Zealand’s manufacturing activity slowed to a seven-month low in April, with the index slipping to 50.5 from 52.8 in March. The downturn was driven by shipping disruptions, higher fuel costs, and delays in raw material deliveries linked to the war in the Middle East.
The conflict poses a dual challenge for the Reserve Bank of New Zealand’s monetary policy. Rising energy prices are adding to inflationary pressures, even as they threaten to undermine an already fragile economic recovery. Markets are currently pricing in about a 40% probability of a rate hike later this month, while a move in July remains fully priced in amid growing inflation concerns. The kiwi has fallen more than 1% so far this week, putting it on course for its first weekly loss in three.
