The New Zealand dollar weakened to $0.596 on Monday as risk sentiment deteriorated amid escalating tensions in the Middle East. Over the weekend, the US and Israel carried out a strike on Iran that resulted in the death of Iran’s Supreme Leader, Ayatollah Ali Khamenei. Iran responded with retaliatory attacks on US assets in neighboring countries, heightening fears of a broader regional conflict and driving investors toward safe-haven assets.
The kiwi is also under pressure from ebbing expectations of near-term monetary easing by the Reserve Bank of New Zealand. Last month, Governor Anna Breman said the economy has room to recover this year without stoking inflationary pressures, signaling less urgency for a prompt rate hike. Her comments followed the RBNZ’s decision to leave its cash rate unchanged and to stress the need to maintain an accommodative policy stance. Markets now assign only a small probability to a first rate increase before December.
