The New Zealand dollar slipped to $0.581 on Monday, extending its pullback from a three-week high as demand for risk assets weakened. Sentiment soured after US–Iran talks broke down and Washington moved to restrict Iranian port traffic. The US military said it would begin blocking all Iranian Gulf ports at 1400 GMT on Monday, while still allowing vessels not bound for Iran to transit the Strait of Hormuz.
On the monetary policy front, the Reserve Bank of New Zealand left its cash rate unchanged last week but signaled it is prepared to raise interest rates if core inflation accelerates, particularly amid rising fuel prices linked to the Middle East conflict. Governor Anna Breman noted that although the central bank now expects somewhat softer economic growth, medium-term inflation pressures remain a central concern. She stressed that, should inflationary pressures intensify, the RBNZ would respond decisively with rate hikes. Markets are currently pricing in more than an 80% chance of an interest rate increase as early as July.
