NZD/USD Steadily Climbs To New Intraday High Of 0.5975 As Greenback Eases Slightly

NZD/USD attracted some bargain hunting during Wednesday’s Asian session and may now be looking to extend the overnight rally from yearly lows just below 0.5950. Spot prices are currently trading at the upper end of the daily range (around 0.5970-0.5975), still influenced by US dollar (USD) price dynamics.

The U.S. Dollar Index (DXY), which tracks the greenback against a basket of currencies, fell for a second straight day and moved away from its highest levels since February 14, which in turn acted as a tailwind for NZD/USD. Nonetheless, reduced bets on interest rate cuts from the Federal Reserve should help limit the dollar’s sharp downside and curb further gains for the pair.

Data released this week showed U.S. manufacturing expanded in March for the first time since September 2022, with labor demand remaining high. In addition, a series of comments from influential FOMC members also raised doubts about whether the Federal Reserve will cut interest rates three times this year. Markets are currently pricing in a total of 65 basis points (bps) of rate cuts in 2024, below the 75 bps expected by the central bank.

Meanwhile, a shift in expectations pushed the benchmark 10-year U.S. government bond yield to a four-month high. This, combined with broad equity market weakness, supports the prospect of some bargain-hunting around the safe-haven currency and limits upside for the risk-sensitive New Zealand dollar. Therefore, it would be prudent to wait for strong follow-through buying before confirming that a bottom has been reached in the NZD/USD pair.

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