New Zealand Dollar Holds Decline on Hawkish Fed

The New Zealand dollar traded around $0.571, an over two-month low, amid a hawkish US Federal Reserve, while investors assessed GDP data at home. The Fed raised interest rates for the first time in three years, bringing the target range to 3.75%-4.00%, and signaled that another hike was likely before year-end, boosting the US dollar. Limiting further losses in the kiwi, however, data showed New Zealand’s economy expanded 0.2% in the three months to June, slightly exceeding the 0.1% market forecast and the Reserve Bank's expectation for no growth. Annual GDP increased 2.6%, also beating the expected 2.2%. The figures pointed to some resilience in economic activity despite the severe energy shock stemming from the Middle East conflict. Earlier this month, the RBNZ raised rates for a second consecutive time but indicated a less aggressive tightening path. However, markets expect the cash rate to reach 3.0% by December, as the recent oil price spike has raised upside inflation risks.