New Zealand dollar extends recovery, hits three-week high ahead of RBNZ outlook

Daily Currency Update

The New Zealand Dollar (NZD) extended its recovery against the U.S. Dollar (USD) on Tuesday, climbing to its highest level in nearly three weeks as broader risk sentiment improved and the greenback eased ahead of the U.S. Federal Reserve’s policy decision. During the Asian trading session, the NZD/USD pair advanced to around US$0.5780, up more than 0.20% on the day, building on a rebound from last week’s six-month low. The kiwi’s recent strength follows a sustained pullback in the U.S. Dollar, which has come under pressure as investors anticipate a more accommodative tone from the Federal Reserve. Markets widely expect the Fed to announce a 25-basis-point rate cut on Wednesday, extending its easing cycle in response to signs of moderating inflation and cooling labor market conditions. The prospect of lower U.S. interest rates has weighed on Treasury yields and supported risk-sensitive currencies, including the New Zealand Dollar. Domestically, sentiment toward the kiwi remains underpinned by improving market confidence and a stabilizing global outlook. However, the Reserve Bank of New Zealand (RBNZ) continues to strike a dovish tone, signaling that it stands ready to cut rates further if necessary to bring inflation sustainably back toward the midpoint of its 2% target band over the medium term. Policymakers have acknowledged that while inflation is gradually easing, economic activity remains subdued, warranting a cautious policy stance. This dovish bias could act as a headwind for the NZD, limiting the currency’s upside potential even as external conditions turn more favorable. Investors will be closely watching upcoming domestic data releases, including employment figures and inflation expectations, for clues about the RBNZ’s next policy steps ahead of its November meeting. From a technical perspective, the NZD/USD pair appears to have found a solid base around the 0.5660–0.5680 zone, which represents its lowest level since April. A sustained move above the 0.5800 psychological level could open the door for further gains toward 0.5850 and 0.5900, while immediate support is seen near 0.5740 and 0.5700. Overall, the near-term bias for the New Zealand Dollar remains tilted to the upside, supported by improving risk appetite and a softer U.S. Dollar backdrop. However, persistent caution from the RBNZ and concerns about global growth may temper the pace of further appreciation, keeping the kiwi’s rally in check ahead of key central bank decisions later this week.