The New Zealand Dollar retreats after RBNZ’s 25 basis point hike fuels expectations of further tightening this year.
The New Zealand Dollar (NZD) pulled back from three-week highs near 0.5800 against the US Dollar (USD) on Friday, trading at 0.5775 after peaking at 0.5794. The pair remains on track for a 1% weekly gain following the Reserve Bank of New Zealand’s (RBNZ) 25 basis point rate hike to 2.5% earlier this week.
The RBNZ’s hawkish stance, signaling further monetary tightening to curb inflation, has driven expectations of two additional rate hikes this year. Meanwhile, the US Dollar regained some footing in a subdued European session as geopolitical tensions eased slightly, though risk appetite remains cautious.
Markets also digested the Federal Reserve’s latest minutes, which revealed a divided committee on the timing of future rate hikes, offering little support for the USD. The RBNZ’s commitment to its 2% inflation target continues to underpin NZD strength.