The New Zealand dollar climbed to $0.590, extending its rebound to the highest level since early June, as the US dollar weakened further amid diminishing expectations of another Federal Reserve rate hike. An unexpectedly soft US retail sales report prompted traders to reduce bets on a Fed increase next month, pushing the greenback lower.
The kiwi also drew support from expectations that the Reserve Bank of New Zealand will deliver another quarter-point rate hike next month, after repeatedly emphasizing the need to withdraw some policy support. Still, a run of weak domestic data has raised fresh doubts about how much further the RBNZ can tighten.
At the same time, persistent tensions in the Middle East are keeping investors cautious. Renewed Israeli strikes on Tehran-backed Hezbollah in Lebanon, combined with the prospect of additional US sanctions on Iran, are clouding the outlook for any near-term peace agreement.
