NZD/USD extended its losing streak for the fourth straight session on Friday, hovering near 0.5750 during Asian trading hours. The pair continued to face pressure following the release of New Zealand’s Business NZ Performance of Manufacturing Index (PMI) for September, which held steady at 49.9 — indicating that the sector remains in contraction territory.
RBNZ’s larger rate cut weighs on NZD
The New Zealand Dollar (NZD) weakened further against the US Dollar (USD) after the Reserve Bank of New Zealand (RBNZ) surprised markets with a larger-than-expected rate cut earlier this week. The central bank lowered its Official Cash Rate (OCR) by 50 basis points to 2.50%, marking its lowest level since July 2022. Markets are now increasingly pricing in the possibility of another 25 bps rate reduction in November, adding to the bearish sentiment surrounding the Kiwi.
USD gains limited amid Fed’s dovish tone
While the NZD/USD pair continues to face downside pressure, the US Dollar could receive some temporary support from heightened risk aversion driven by the ongoing US government shutdown. The Senate remains gridlocked over legislation aimed at ending the shutdown, which has dampened overall market sentiment.
However, dovish signals from the Federal Reserve may limit further USD strength. San Francisco Fed President Mary Daly commented late Thursday that inflation has eased more than expected, noting that the central bank continues to consider further policy adjustments in a risk management context. Fed Governor Michael Barr also remarked that while the September rate cut was appropriate, monetary policy remains slightly restrictive. He added that it is still too early to gauge the broader economic impact of the federal government shutdown.
