FX.co ★ Kiwi Dollar Falls Back Toward 4-Month Low

The New Zealand dollar declined to approximately $0.584 on Tuesday, edging closer to its four-month low due to trade tensions and anticipated further interest rate cuts by the Reserve Bank of New Zealand (RBNZ). Investor sentiment deteriorated following threats by US President Trump to impose significant tariffs on China concerning rare-earth exports, alongside possible levies on countries with digital taxes. This heightened risk aversion and adversely impacted currencies tied to commodities. The pressure intensified after the RBNZ reduced interest rates last week and indicated the likelihood of further easing, citing domestic and global growth challenges. Meanwhile, Prime Minister Christopher Luxon criticized the central bank for its lack of aggressive action. Currently, markets estimate nearly a 50% probability of another rate cut in October, with a complete adjustment expected by November. Nevertheless, losses were somewhat mitigated by a weaker US dollar, following the removal of Fed Governor Lisa Cook by Trump due to alleged mortgage fraud, which raised issues regarding the independence of the central bank.