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NZD/USD could reach 0.6150 as US Dollar remains subdued

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FXStreet in Market News 12 392005
May 27, 2024 13:45

content provided with permission by FXStreet

  • NZD/USD remains stronger amid a softer US Dollar on Monday.
  • The US Dollar lost ground after the 10-year US Treasury yield depreciated on Friday.
  • The New Zealand Dollar received support as RBNZ raised the forecast for peak rates and postponed the timing of a rate cut.

NZD/USD continues its winning streak for the fourth successive day, trading around 0.6130 during the Asian hours on Monday. The depreciation in the US Dollar (USD) is underpinning the NZD/USD pair, which could be attributed to the improved risk appetite after the softer University of Michigan’s 5-year Consumer Inflation Expectations for May was released on Friday.

The UoM’s 5-year Consumer Inflation Expectations for May on Friday. It eased slightly to 3.0%, below the forecasted 3.1%. Despite the upward revision of the Consumer Sentiment Index to 69.1 from a preliminary reading of 67.4, it still marked the lowest level in six months. These figures likely contributed to strengthening investors’ sentiment regarding potential rate cuts by the Federal Reserve.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against the six other major currencies, trades near 104.70 by the press time. On Friday, the Greenback lost ground due to the lower 10-year US Treasury yield, which stood at 4.46%.

Across the pond, the New Zealand Dollar (Kiwi) remains supported by the hawkish stance of the Reserve Bank of New Zealand (RBNZ). The central bank has raised its forecast for a peak in interest rates and delayed the timing for any rate cut. The RBNZ kept its cash rate at a 15-year high of 5.5%, indicating that restrictive policy needs to be maintained longer to ensure inflation returns to the 1-3% target range.

In an interview with Bloomberg last week, RBNZ Governor Adrian Orr downplayed the likelihood of another interest rate hike, suggesting that the central bank would only tighten policy further if necessary to manage inflation expectations. Additionally, RBNZ Deputy Governor Christian Hawkesby emphasized that “cutting interest rates is not part of the near-term discussion.”