The New Zealand dollar hovered around $0.581, attempting to recover from a two-month low as risk appetite improved following a recent pause in hostilities in the Middle East. Israel and Iran agreed to stop mutual attacks after a period of heightened violence, lifting hopes for renewed negotiations toward a broader regional ceasefire.
At the same time, the Kiwi remained underpinned by expectations of further monetary tightening, after the Reserve Bank of New Zealand adopted a more hawkish stance. In late May, the central bank opted in a split decision to leave interest rates unchanged, but signaled that rates could rise sooner and by more than previously anticipated to counter the effects of the energy price shock.
Market pricing now reflects the possibility that the RBNZ will raise its 2.25% cash rate by 25 basis points at its next meeting on July 8, with expectations for the policy rate to peak at around 3.50% late next year.