Anna 
In the early hours of Tuesday’s European trading session, the NZD/USD pair rebounded from recent losses, hovering around 0.6100. The resurgence was attributed to the exchange rate finding support in the wake of declining U.S. Treasury yields.
As of press time, the U.S. dollar index (DXY) experienced a dip, reaching around 103.10, accompanied by 2-year and 10-year U.S. Treasury yields standing at 4.39% and 4.11%, respectively. Market sentiment reflects expectations that the Federal Reserve (Fed) might implement more substantial interest rate cuts in 2024 than other major central banks. Nevertheless, recent hawkish remarks from Fed members indicate a potential shift towards a more conservative interest rate trajectory.
Investors are turning to the safe-haven appeal of the dollar amid geopolitical uncertainties and potential disruptions to maritime trade routes in the Red Sea region. Escalating attacks by Iran-backed Houthi rebels on ships at sea have contributed to this sentiment. Furthermore, U.S. officials have confirmed the initiation of a new round of military operations, including air strikes, against Houthi terrorist targets in Yemen.
On Tuesday, the New Zealand Business Association released data indicating a decline in New Zealand’s Business Services Industry Performance Index (PSI) to 48.8 in December from 51.2 in November. Compounded by concerns related to the real estate crisis and low consumer and business confidence, worries about China’s economic growth momentum continue to exert downward pressure on the New Zealand dollar, consequently weakening the NZD/USD pair.
Later in the North American session, the release of the Richmond Fed manufacturing index for January is anticipated to provide further insights into the current state of the U.S. economy. Attention will be keenly directed towards New Zealand’s fourth-quarter Consumer Price Index (CPI) data on Wednesday, offering additional perspectives on the economic landscape.
