Geopolitical tensions and US sanctions on Iran drive safe-haven demand for the USD, pressuring the New Zealand Dollar.
NZD/USD fell to around 0.5950 during European trading on Tuesday, extending losses for a second day. The decline follows a surge in safe-haven demand for the USD amid escalating US sanctions targeting Iran and its global trade partners, including China.
The US Treasury outlined plans to impose sanctions on nations maintaining business ties with Iran, with a strict timeline for compliance. Market participants remain cautious, uncertain whether the measures will resolve tensions or prolong hostilities, particularly around the Strait of Hormuz.
Despite the USD’s strength, further gains may be limited by the US Treasury’s decision to double buyback operations for longer-dated bonds, potentially using up to $1 trillion from its General Account.