New Zealand Dollar falls toward 0.5650 despite rising RBNZ rate hike bets

• The New Zealand Dollar declines as US-Iran tensions continue to support demand for the US Dollar.
• Markets see around an 80% chance of a 25-basis-point interest rate hike in New Zealand in October.
• Investors monitor developments surrounding the Strait of Hormuz and upcoming US economic data.

NZD/USD declines to around 0.5650 at the time of writing on Tuesday, down 0.25% on the day, and remains close to its lowest level since late June. The New Zealand Dollar (NZD) remains under pressure against the US Dollar (USD) as persistent tensions between the United States (US) and Iran support demand for the Greenback, while expectations of another interest rate hike by the Reserve Bank of New Zealand (RBNZ) help limit the Kiwi's losses.

On the geopolitical front, Iranian Foreign Minister Abbas Araghchi said he met with Qatari mediators to discuss proposals that could be conveyed to the United States. According to Araghchi, any reopening of the Strait of Hormuz remains conditional on the implementation of requirements set out by Iran's Supreme Leader.

The discussions come after US President Donald Trump rejected an Iranian proposal on Sunday that would have allowed the Strait of Hormuz to reopen. Persistent tensions between Washington and Tehran are therefore maintaining some demand for safe-haven assets, including the US Dollar, and acting as a headwind for NZD/USD.

However, the prospect of further monetary tightening in New Zealand provides some support to the New Zealand Dollar. Markets now see around an 80% chance that the RBNZ will raise its Official Cash Rate (OCR) by 25 basis points to 3.00% at its October 28 meeting, compared with roughly a one-in-three chance immediately after the September rate hike.

Expectations have strengthened notably after RBNZ Governor Anna Breman warned that higher Crude Oil prices could push near-term inflation above the central bank's projections. Stronger-than-expected second-quarter growth data have also reinforced expectations of further monetary tightening.

The upcoming New Zealand Consumer Price Index (CPI), scheduled for October 21, will therefore be closely watched, coming one week before the monetary policy decision. Persistent inflation could reinforce expectations of another rate hike, even though the RBNZ's latest projections initially pointed to a pause in October before another increase in December.

In the United States, attention now turns to upcoming economic data and comments from Federal Reserve (Fed) officials. Investors will notably monitor Personal Consumption Expenditures (PCE) inflation data, the Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI) and the Nonfarm Payrolls (NFP) report later this week. Strong US data could provide additional support to the US Dollar, while signs of a cooling labor market could reduce its advantage over the Kiwi.

NZD/USD technical analysis

In the one-hour chart, NZD/USD trades at 0.5651, holding a bearish near-term bias as it remains below the 100-hour simple moving average (SMA) at 0.5667 and the 200-hour SMA at 0.5696. The pair is capped by a nearby horizontal resistance at 0.5686, while the Relative Strength Index (14) at 42 suggests subdued downside momentum rather than aggressive selling pressure.

On the topside, initial resistance emerges at the 100-hour SMA at 0.5667, followed by the horizontal barrier at 0.5686 and the 200-hour SMA at 0.5696, with a stronger hurdle at 0.5735. On the downside, immediate support sits at 0.5649, ahead of a lower horizontal floor near 0.5626, where sellers would need to push through to extend the current bearish sequence.

(The technical analysis of this story was written with the help of an AI tool. Know more.)