The New Zealand Dollar (NZD) held steady above 0.5600 against the US Dollar (USD) during the Asian trading session on Thursday, extending its gains for the third consecutive day. The NZD benefited as the US Dollar continued its downward trend, driven by December’s US Consumer Price Index (CPI) data that came in cooler than expected, raising expectations that the Federal Reserve may implement two interest rate cuts this year.
The US CPI for December increased by 2.9% year-over-year, up from 2.7% in November, matching market expectations. On a monthly basis, the CPI rose by 0.4%, slightly higher than the previous month’s 0.3% increase.
Core CPI, which excludes food and energy prices, rose by 3.2% annually, slightly lower than November’s 3.3% and analysts’ forecast of 3.3%. On a monthly basis, core CPI increased by 0.2%, signaling a moderation in inflation pressures.
The US Dollar Index (DXY), which tracks the performance of the greenback against six major currencies, is hovering near 109.00. Meanwhile, the yields on 2-year and 10-year US Treasury bonds dropped to 4.27% and 4.66%, respectively, falling by over 2% on Wednesday. This drop in yields is fueling speculation that the Fed’s easing cycle could continue.
The NZD also gained from an improving market sentiment following reports that US President-elect Donald Trump’s economic team is considering a more gradual approach to raising import tariffs, boosting investor confidence. Additionally, strong trade data from China and measures by Beijing to stabilize the Yuan provided further support to the Kiwi.
However, the NZD’s gains may be limited as markets anticipate that the Reserve Bank of New Zealand (RBNZ) will cut its cash rate by 50 basis points to 3.75% in February due to weak domestic economic conditions.
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