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NZD/USD halted three consecutive days of gains and was trading around 0.6080 during the Asian session on Tuesday. The decline could be attributed to a stronger U.S. dollar (USD), which was supported by waning expectations for aggressive rate cuts from the Federal Reserve following a strong jobs report and concerns about sticky U.S. inflation.
The U.S. Dollar Index (DXY), which measures the greenback’s value against six other major peers, extended its winning streak for a sixth straight day on Tuesday. As of press time, the U.S. dollar index was trading near 103.30, and the 2-year and 10-year U.S. Treasury yields were 3.96% and 4.09% respectively.
On Monday, Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis, reiterated the Fed’s data-reliant approach. According to Reuters, Kashkari reiterated the familiar views of Fed policymakers on the strength of the U.S. economy, noting that despite the recent pickup in overall unemployment, inflationary pressures continue to ease and the labor market is strong.
The New Zealand dollar weakened after China, New Zealand’s largest trading partner, released disappointing trade balance data on Monday. Additionally, despite China’s fiscal stimulus package announced over the weekend, the New Zealand dollar failed to gain traction as investors remained uncertain about the extent of the package.
China’s trade surplus narrowed in September, with the trade account recording $81.7 billion, below expectations of $89.8 billion and down from the previous figure of $91.02 billion. Exports rose 2.4% annually, well below expectations of 6.0% and down from 8.7% in the previous period. Meanwhile, imports grew by 0.3%, below expectations of 0.9% and the previous reading of 0.5%.
Investors are likely to look forward to New Zealand’s third-quarter inflation data due on Wednesday. The consumer price index (CPI) is expected to fall back to the central bank’s target range of 1%-3%, with annual growth falling to 2.2% in September from the previous 3.3%.
The New Zealand dollar is under downward pressure as markets price in an 80% chance of another 50 basis point interest rate cut by the Reserve Bank of New Zealand (RBNZ) at its final meeting of the year in November.
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