Ella 
NZD/USD extended the previous day’s rebound from the 0.5900 mark, the lowest level since November 2022, and rose in Asia on Friday. The spot price is currently trading around the 0.5935 area, up 0.15% on the day, and it seems to have ended the 8-day losing streak, but the intraday rise lacks bullish confidence.
One of China’s largest real estate developers, China Evergrande, filed for creditor protection in a U.S. bankruptcy court on Thursday. The news fueled fears of a deepening crisis in China’s property sector and deteriorating conditions in the world’s second-largest economy, raising hopes of more stimulus from the government. This in turn provided some support to commodity currencies including the New Zealand dollar, which received additional support from a hawkish outlook from the Reserve Bank of New Zealand (RBNZ).
It is worth recalling that the Reserve Bank of New Zealand said on Wednesday that interest rates would remain restrictive for some time, with the key Official Cash Rate (OCR) now forecast to remain at 5.5% until December 2024. Aside from this, mild weakness in the U.S. dollar (USD) also helped NZD/USD attract some buying on the final day of the week. Meanwhile, the dollar’s decline was likely due to a slight pullback in U.S. Treasury yields, although bets on further tightening by the Federal Reserve should limit its losses.
Indeed, the minutes of the Fed’s July 25-26 meeting, released on Wednesday, showed policymakers believed further rate hikes were needed, but still prioritized fighting inflation. In addition, U.S. data pointing to an extremely strong economy should allow the Fed to keep interest rates elevated for longer. That boosted U.S. Treasury yields and the U.S. dollar, which in turn prevented traders from being aggressively long NZD/USD and limited its gains.
Looking ahead, there are no relevant data releases from the US on Friday, leaving the NZD dependent on the greenback. In addition, broader risk sentiment may further generate short-term trading opportunities. But spot prices are still on track for a fifth straight week of losses, with focus now turning to next week’s flash PMI readings and the much-anticipated Jackson Hole annual meeting.
