- NZD/USD fell sharply below 0.6100 as the RBNZ put further rate hikes on hold earlier.
- The US dollar index printed a fresh 10-week high at 103.99 amid delays in US debt ceiling issues.
- The RBNZ believes it has moved the interest rate needle past its previous top consideration.
The NZD/USD the pair fell sharply below the round support of 0.6100 in the Tokyo session. The Kiwi asset faced huge selling pressure after Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr commented on the downsides of pushing interest rates. rates well above what was previously considered neutral.
S&P500 futures pared some of the gains posted in early Asia. Overall market sentiment is cautious as the United States economy is rapidly approaching default. US Treasury Secretary Janet Yellen has consistently warned the White House that it will be out of funds by June 1 if the borrowing limit remains stagnant.
The American dollar The index (DXY) printed a fresh 10-week high at 103.99 amid delays in US debt ceiling issues. US President Joe Biden and other congressional leaders are not ready to accept party terms from Republicans, which include eliminating an additional tax on wealthy communities and higher spending proposed in the budget.
Meanwhile, the weak certainty of an interest rate hike by the Federal Reserve (Fed) in June had no impact on the USD index. Fed policymakers favor holding the rate-hiking period until June as tight credit conditions at US regional banks weigh on inflationary pressures.
On Wednesday, the RBNZ raised its official cash rate (OCR) by 25 basis points (bps) to 5.50%. RBNZ Orr believes the central bank has gone beyond what was previously considered neutral. He further added that there is a risk that the central bank will have to raise rates due to sticky inflation expectations and continued government spending. If the RBNZ believes it has moved beyond its previous peak consideration, the scope for further rate hikes is extremely slim.
