New Zealand Dollar Weakens on Possible U.S. Tariff Risk

The New Zealand dollar fell against the U.S. dollar after registering modest gains the previous day, trading around 0.5850 during Asian hours on Friday. Market participants cited the U.S. Trade Representative’s designation of New Zealand among 54 economies that have not sufficiently prohibited the import of goods produced with forced labor, potentially exposing the country to a 12.5 % U.S. tariff.

However, the currency’s downward drift was tempered by strong domestic monetary expectations stemming from a hawkish stance by the Reserve Bank of New Zealand (RBNZ). Markets are pricing an 80 % probability of a rate hike in July, with an estimated 75 basis points of tightening projected for the year—a cumulative three‑quarter‑point increase.

Meanwhile, the U.S. dollar maintained its strength as traders weighed developments concerning a possible U.S.–Iran peace arrangement to terminatethe recent hostilities. Tensions remain high after Iranian Foreign Minister Abbas Araghchi warned that the Strait of Hormuz falls within Iranian and Omani territorial waters, labeling U.S. regional bases as potential retaliation targets.

Conversely, U.S. President Donald Trump expressed optimism early Wednesday, saying Iran is close to signing a peace framework, with a breakthrough possible over the weekend. Adding to the regional complexity, Israeli Defense Minister Israel Katz confirmed on Thursday that Israel would continue military operations in Lebanon despite a ceasefire, preventing displaced residents from returning.

The greenback also benefited from a resilient domestic U.S. labor market, buoyed by stronger‑than‑expected May ADP private payrolls and JOLTS job‑opening data released earlier in the week.

Market participants are now awaiting the upcoming U.S. Nonfarm Payrolls (NFP) report for fresh direction. Current projections indicate the U.S. economy added 85,000 jobs in May, with the unemployment rate expected to remain steady at 4.3 %.

Any positive surprises or signs of further labor‑market strength could prompt traders to bet that the Federal Reserve will maintain higher rates for a longer period. Markets are currently pricing in a roughly 42 % chance of a Fed rate hike in December, according to the CME FedWatch Tool.

Source link