The New Zealand dollar is poised to cap its longest run of weekly declines since early 2025 as higher oil prices and the risks of a close election weigh on the currency, with market strategists warning of further losses ahead. The currency traded around 56 US cents in Asian trading on Friday, on track for a sixth weekly loss. While the kiwi has been hurt by a stronger greenback, surging oil prices and signs of a still-fragile economy have also added to the pressure, according to strategists.
“Given NZ’s dependence on imported energy, the renewed surge in oil prices will weigh further on the already soft economy and by extension the NZ dollar,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia in Sydney. “There is potential for NZD/USD to extend its losses,” she said, adding that the bank is reviewing its forecasts. The New Zealand dollar went from being among the best-performing Group-of-10 currencies in the first eight months of the year to the worst last month, weighed down by a resurgent greenback, oil’s surge back above $100 a barrel, and a sluggish economy.
Traders are positioning for further losses, with the premium to hedge NZD/USD’s downside over the next month versus upside rising to its highest since April on Friday. Uncertainty surrounding the outcome of November’s general election, along with markets pricing in more Reserve Bank rate hikes than the central bank itself projects, is adding to the New Zealand dollar’s headwinds, according to Kiwibank Ltd. “The Kiwi looks increasingly unattractive from a yield perspective, with widening NZ-US rate differentials continuing to favor the US dollar,” said Adrian Lodge, a senior currency dealer at Kiwibank in Auckland. “While ongoing tensions in the Middle East and a cautious global risk backdrop continue to support the US dollar and weigh on risk-sensitive currencies such as the NZD.”
Source: Bloomberg Markets · Summarized by HeadlinesBriefing