- NZD/USD holding onto minor gains in the Asain session.
- Risk on sentiment nudges the demand for the US dollar.
- Kiwi reaps RBNZ hawkish view benefit.
The selling tone surrounding the US dollar keeps NZD/USD afloat on Tuesday in the Asian trading hours. The pair rose from the lows near the 0.7130 level to touch the multi-month high in the vicinity of 0.7320 arra. However, prices find it difficult to cross the hurdle and continue to trade in the known territory.
At the time of writing, the NZD/USD pair trades at 0.7285, up 0.19% for the day.
Investors seem reluctant to position themselves against the US dollar as inflationary fears cool down, despite strong economic performance.
Market participants were fearful that upbeat economic conditions could prompt the Fed to alter its monetary policy. On the contrary, the Fed shrugs off the rising pricing pressure as transitory and refrained from taper talk and asset purchase programs. This, in turn, diminishes the attractiveness of the US dollar.
Meanwhile, improved risk appetite after the Organisation for Economic Cooperation and Development (OECD) raised its global economic outlook for 2021 to 5.8% from 5.6%, cheered investors.
On the other hand, NZD is in high spirit post-RBNZ hawkish forward guidance. The economic data in the home country is encouraging with Business Confidence rose to 1.80% in May from -2% in the previous month and Building Permits jumped to 4.8% in April.
Meanwhile, China Caixin Manufacturing PMI jumped 52.0% in May in comparison with market expectations at 51.9%. The growth in the Chinese economy indirectly benefits the performance of the kiwi.
In addition to that New Zealand backs Australia in a trade spat with China. This could be read as a limiting factor for the kiwi as China is the biggest trading partner for New Zealand exports. That said, any sort of disruption could threaten the business and trade activity between the two countries.
Traders eagerly await the US PMI data for fresh trading impetus.
NZD/USD Additional Levels
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