Key Moments
- NZD/USD advanced toward 0.5950 in early Thursday Asian trading, holding near a two-and-a-half-month high.
- The People’s Bank of China kept its one-year and five-year Loan Prime Rates unchanged at 3.00% and 3.50%, respectively.
- Market pricing for a September Federal Reserve rate hike eased, with the implied probability at 32.7%, down from 47% a month earlier.
NZD/USD Holds Firm Near Recent Highs
NZD/USD gained further ground to trade around 0.5950 during Thursday’s early Asian session. The pair stayed close to a two-and-a-half-month high, supported by a hawkish tone from the Reserve Bank of New Zealand (RBNZ) and moderating U.S. inflation data that has tempered expectations for additional Federal Reserve tightening.
Hotter-than-anticipated New Zealand CPI readings have reinforced expectations for continued RBNZ policy tightening, with swaps indicating the possibility of up to three more rate increases extending through early 2027.
China Keeps Loan Prime Rates on Hold
The People’s Bank of China (PBOC) left its benchmark Loan Prime Rates unchanged for a 15th consecutive month in August. The one-year LPR remained at 3.00%, while the five-year LPR was kept at 3.50%.
Separately, China’s Commerce Ministry issued a decision on corporate tax rates for companies associated with anti-dumping measures on imported polyoxymethylene from the United States (US), the European Union (EU), Taiwan and Japan, according to Reuters.
Fed Expectations Ease as U.S. Inflation Cools
On the U.S. side, cooler inflation readings have prompted traders to scale back expectations for a Federal Reserve rate increase at the upcoming September policy meeting. Weaker rate-hike bets have weighed on the U.S. Dollar, offering support to NZD/USD.
According to the CME FedWatch Tool, markets are currently assigning a 32.7% probability to a Fed rate hike in September, down from 47% one month earlier.
| Event / Indicator | Latest Detail |
|---|---|
| NZD/USD spot level (early Asian session) | Near 0.5950 |
| PBOC one-year Loan Prime Rate | 3.00% |
| PBOC five-year Loan Prime Rate | 3.50% |
| Market-implied probability of September Fed hike | 32.7% (vs. 47% a month earlier) |
BNY Weighs In on NZD Valuation and RBNZ Path
Strategists at BNY noted that NZD has strengthened, stating that the currency is “now trading slightly above the rolling 12‑month average.” At the same time, they challenged prevailing market assumptions embedded in the rates curve, remarking that “we continue to doubt the current market pricing of interest rates expectations, where two more Reserve Bank of New Zealand (RBNZ) hikes are expected by year end.”
While acknowledging that “domestic activity remains robust,” BNY also highlighted that “inflation expectations remain relatively well-anchored,” suggesting that this could limit the scope for additional RBNZ tightening even as the New Zealand Dollar shows resilience.
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