The New Zealand dollar strengthened to around $0.596 on Friday, supported by expectations that the Reserve Bank of New Zealand will continue tightening monetary policy this year. Economists broadly anticipate a 25-basis-point rate hike from the RBNZ next week, and about two-thirds expect at least one additional increase by year-end, which could lift the cash rate to 3% or higher by December. The outlook builds on the RBNZ’s first rate hike in more than three years in July, when the central bank signaled that further tightening might be required to return inflation to target.
Externally, investors are awaiting Federal Reserve Chair Kevin Warsh’s first Jackson Hole speech later today for guidance on the likelihood of a September rate increase. At the same time, geopolitical tensions continue to pressure risk-sensitive assets amid reports that President Trump is no longer interested in reviving the June agreement with Iran. Despite Friday’s gains, the kiwi is down 0.2% for the week.
