Geopolitical tensions between the US and Iran overshadow the RBNZ’s hawkish policy stance, pressuring the New Zealand Dollar.
The NZD/USD pair fell to around 0.5885 in early European trading Thursday, as renewed US-Iran military strikes dampened risk sentiment. Overnight airstrikes by the US targeted Iranian military sites and intercepted attack drones near the Strait of Hormuz, escalating tensions.
The Reserve Bank of New Zealand held its Official Cash Rate at 2.25% Wednesday but signaled potential hikes ahead, with three board members favoring a 25-basis-point increase. Governor Anna Breman noted rate rises were likely in coming meetings, contingent on inflation and risk assessments. Markets now price multiple hikes through early 2027.
Despite the RBNZ’s hawkish outlook, geopolitical risks outweighed policy support, dragging the Kiwi lower against the USD.