FX.co ★ New Zealand Dollar Weakens

The New Zealand dollar slipped to $0.585 on Tuesday, giving back some of Monday’s gains after a volatile session, as investors assessed comments from RBNZ Governor Anna Breman. Breman indicated that the central bank would look through a temporary spike in energy prices stemming from the Middle East conflict, but stressed that further interest rate increases could be required if inflation showed signs of becoming entrenched. She noted that the duration of the energy shock would be crucial in weighing the risk of persistently higher inflation against the potential drag on economic growth. Since the conflict began, markets have increasingly speculated that the RBNZ may need to tighten policy sooner than previously expected to offset the inflationary effects of rising energy costs. While traders see little likelihood of a rate hike in April, pricing suggests roughly a 60% probability of an increase in May.