NZD/USD Trades Lower Amid Some USD Buying, Holding Above 0.6100 Mark

In the Asian session on Tuesday, NZD/USD rebounded slightly from the one-week low of 0.6100 in the previous trading day, but it still struggled to extend the rebound. Against the backdrop of new buying in the US dollar, NZD/USD remained confined to the range of fluctuations in the past month or so, currently hovering around 0.6120, down nearly 0.20% throughout the day.

In the context of the hawkish outlook of the Federal Reserve (FED), policymakers continue to advocate only one rate cut this year. In fact, Philadelphia Fed President Patrick Harker said on Monday that keeping interest rates at current levels for a longer period of time would help reduce inflation and ease upside risks. This still supports the rise in US Treasury yields, helping the US dollar to regain some positive momentum and in turn suppressing NZD/USD.

In addition, the mixed economic data released by China on Monday highlighted the bumpy recovery prospects of China, the world’s second largest economy, which has become another factor suppressing the Australian and New Zealand currencies, including the New Zealand dollar. Meanwhile, weak U.S. consumer and producer prices suggest that inflation is weakening, keeping alive the prospect of the Fed starting to cut interest rates in September and again in December. This could limit the dollar’s gains and provide some support for the NZD/USD pair.

Market participants now look forward to U.S. economic data, including the release of monthly retail sales and industrial production data. In addition, speeches by influential Fed officials and U.S. bond yields will drive demand for the dollar, providing a clear boost to NZD/USD. Reuters expects this to be. Traders may further look for clues from the broader market risk sentiment to seize short-term trading opportunities in the risky asset NZD.

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