A resurgent New Zealand dollar jumped to a three-week high of $0.5714 after an aggressive shift at the central bank and strong economic data.The Reserve Bank of New Zealand cut rates on Wednesday but said a rate freeze was under discussion and indicated the easing cycle was likely over, with markets turning to price hikes in December next year.
This contrasts with the more than 90 basis points of cuts that the US Federal Reserve has negotiated between now and the end of 2026.
Data shows New Zealand retail sales rose in the third quarter, while business confidence rose to its highest level in a year. “The green Kiwi shoots are really starting to grow quickly now,” says Westpac strategist Imre Speizer. The Australian dollar has also appreciated after inflation was higher than expected on Wednesday. This added that the easing cycle has come to an end there too.
Australia’s 10-year yield of 4.48% is the highest in the G10, which analysts say makes the currency look cheap.
At $0.6526, the Aussie is in the middle of a channel where it has been trading for about 18 months. However, Societe Generale’s Kit Juckes notes that it has been watching the Chinese yuan more closely than interest rates lately, which could support further gains as the yuan has risen sharply in recent sessions.
Pressure from the Chinese central bank’s fixing mechanism kept the yuan open on Thursday.
Sterling climbed to its highest level since late October at $1.3256 and was on track for its biggest weekly gain since August, as Britain’s budget eased some concerns about national finances.
The US dollar index was flat at 99.433, having retreated from a six-month high a week ago and heading for its biggest weekly decline since July.
“The market will soon be thinking about the big trades for 2026, and I highly doubt ‘long USD’ will be one of them,” said Brent Donnelly, president of Spectra Markets.
He said that if White House economic adviser Kevin Hassett – an advocate for interest rate cuts – were named the next chairman of the Federal Reserve, this should be negative for the dollar.
“Once we get past Friday, all corporate demand and real money in USD will be over.”
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