The New Zealand dollar rises to a more than four-month high against the US dollar, and the Reserve Bank of New Zealand is expected to raise interest rates further

On Wednesday (October 20), the New Zealand dollar traded positively against the U.S. dollar, although it had dropped a few points from the four-month high it hit earlier.


The currency pair continued its bullish breakthrough momentum above the very important 200-day moving average near 0.7100 and gained momentum for the sixth consecutive day. This momentum pushed the New Zealand dollar to the highest level since June 11. And supported by bets that the Reserve Bank of New Zealand will further raise interest rates to curb high inflation.

The quarterly CPI report released earlier this week showed that consumer prices in New Zealand rose by 4.9% year-on-year, the highest increase in 10 years between July and September. This comes at a time when the market is full of risk-taking sentiment, which further promotes the New Zealand dollar, which is considered a higher risk. Nevertheless, a series of factors limit the upside of the New Zealand dollar against the US dollar.

The U.S. dollar has gained some support from the continued surge in U.S. Treasury yields, thanks to the prospect that the Fed may tighten policy early. In fact, as the market increasingly accepts that the Fed will soon begin to reduce the large-scale stimulus measures during the epidemic, the benchmark 10-year US Treasury bond yield has soared to its highest level since May of this year.

Fearing that inflation is rising faster than expected, the market seems to have begun to factor in possible interest rate hikes in 2022. In addition, the stock market is generally cautious, further benefiting the U.S. dollar and restraining the New Zealand dollar, which is considered to be more risky, from further gains.

Investors seem to be reluctant to make new long bets on the New Zealand dollar against the US dollar because the short-term charts show overbought conditions and there is no relevant market economy data in the United States. However, the scheduled speeches of Chicago Fed Chairman Evans and Fed Governor Quarles may provide some impetus in the North American market later.

Traders will further look for clues from the broader market risk sentiment to seize some short-term opportunities. However, the exchange rate is still biased towards bullish traders, and any substantial pullback is more likely to remain limited and attract buying at lows close to 0.7100 integer points.

The upper resistance level pays attention to 0.7211, 0.7243, 0.7269, and the lower support level pays attention to 0.7100, 0.7052, 0.7016.

(New Zealand dollar against the US dollar daily chart)

At 19:40 GMT+8, the New Zealand dollar was quoted at 0.7167 against the US dollar.