The New Zealand Dollar (NZD) weakened against the US Dollar (USD) on Wednesday, trading around 0.6140. This decline comes after two consecutive days of losses for the NZD.
Market Drivers:
- Hawkish Fed Comments: Recent remarks by Minneapolis Fed President Neel Kashkari suggesting the possibility of further rate hikes in the US boosted the USD.
- Risk Aversion: A prevailing risk-averse sentiment in the market also supported the US Dollar’s safe-haven status.
- Rising US Treasury Yields: Increasing yields on US Treasury bonds further strengthened the USD’s appeal.
- Soft US Housing Data: Despite the USD’s gains, the release of weaker-than-expected US Housing Price Index data for March tempered the upside momentum.
Focus on US Data:
- Fed Beige Book: Investor attention now shifts towards the release of the Federal Reserve’s Beige Book on Wednesday, offering insights into the current state of the US economy.
New Zealand Developments:
- Falling Business Confidence: The ANZ Business Confidence Index in New Zealand recorded its fourth consecutive decline, reaching its lowest level since September 2023.
- RBNZ Policy Outlook: The Reserve Bank of New Zealand (RBNZ) recently revised its forecast, anticipating a higher peak for interest rates and a delay in potential rate cuts.
- Upcoming Events: The release of the New Zealand Budget on Thursday and a speech by RBNZ Governor Adrian Orr on Friday are key events to watch for further clues on the NZD’s direction.
Overall:
The NZD’s depreciation reflects a combination of factors: hawkish Fed commentary, risk aversion in the market, and rising US Treasury yields. While the soft US housing data provided some temporary headwinds for the USD, the upcoming Fed Beige Book and developments in New Zealand will be crucial in determining the future trajectory of the NZD/USD pair.
