New Zealand Dollar finds few buyers as USD weakness caps losses

The modest NZD/USD rebound from its post-RBNZ swing low struggles to gain momentum.
Lower bond yields and hopes of diplomacy with Iran pressure the USD, lending support to NZD/USD.
Further downside remains favoured as fundamentals give bearish traders the advantage.

NZD/USD is trading around 0.5630-0.5625. The pair slips in Friday's Asian session, giving back part of Thursday's modest advance. Its rebound from the two-week low reached after Wednesday's Reserve Bank of New Zealand (RBNZ) decision has stalled. Spot prices remain set for heavy losses for the first time in three weeks.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

At 2.75%, the RBNZ's Official Cash Rate (OCR) was unexpectedly held steady, disappointing investors who had assigned a near-certain probability to a 25-basis-point (bps) increase. RBNZ Governor Anna Breman was among four members favouring a pause to assess the lagged effects of the July and September rate rises. Their preference outweighed the committee's tightening bias in market sentiment, weighing on the New Zealand Dollar (NZD). Selling pressure on the US Dollar (USD) for a third consecutive day nevertheless appears to be cushioning NZD/USD's decline.

A sharp drop in US bond yields reflects traders unwinding the geopolitical risk premium as hopes revive for diplomatic engagement between the US and Iran. The safe-haven dollar is consequently under pressure. Investors remain cautious, however, about the US-Iran confrontation over the Strait of Hormuz and intensifying hostilities between Saudi Arabia and the Iran-backed Houthis. With uncertainty keeping crude oil prices elevated, inflation concerns continue to reinforce hawkish expectations for the US Federal Reserve (Fed). That could put a floor under the USD.

Around a 75% probability of a December increase in US borrowing costs is priced in by traders, according to CME Group's FedWatch Tool. Thursday's US economic releases reinforced those expectations: third-quarter growth accelerated to an annualised 3.4%, while inflation increased in September. The data therefore support the prospect of buyers returning to the USD at lower levels. For NZD/USD, this suggests downside remains the path of least resistance, with any substantial rebound more likely to attract selling.

US Dollar: Today's Currency Performance

The US Dollar (USD) recorded its strongest performance against the New Zealand Dollar today. Percentage changes against the major currencies listed are shown in the table below.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.20%	-0.15%	-0.27%	-0.15%	0.09%	0.09%	-0.48%
EUR	0.20%		0.05%	-0.09%	0.06%	0.30%	0.28%	-0.28%
GBP	0.15%	-0.05%		-0.13%	0.01%	0.25%	0.24%	-0.33%
JPY	0.27%	0.09%	0.13%		0.14%	0.37%	0.37%	-0.20%
CAD	0.15%	-0.06%	-0.01%	-0.14%		0.23%	0.23%	-0.34%
AUD	-0.09%	-0.30%	-0.25%	-0.37%	-0.23%		-0.01%	-0.56%
NZD	-0.09%	-0.28%	-0.24%	-0.37%	-0.23%	0.00%		-0.56%
CHF	0.48%	0.28%	0.33%	0.20%	0.34%	0.56%	0.56%

Percentage movements between major currencies are displayed in the heat map. Select the base currency in the left-hand column and the quote currency in the top row. For instance, starting with the US Dollar on the left and reading across to the Japanese Yen gives the percentage change for USD (base)/JPY (quote) in the intersecting cell.