Kiwi braces for RBNZ decision, Aussie tries to steady after setback

SYDNEY: The New Zealand dollar edged higher on Monday as traders braced for a widely expected interest rate hike at home, while the Aussie was trying to recover momentum after a US dollar induced setback. The kiwi dollar rose 0.2% to $0.5919, after slipping 0.6% on Friday to finish 1% lower last week. It has support at the $0.5860 and $0.5821 levels and is set to end August 0.6% higher. The Reserve Bank of New Zealand is widely expected to raise interest rates by a quarter-point to 2.75% on Wednesday, but there is much uncertainty about how high interest rates would go with its new economic forecasts. Oil prices climbed over 2% on Monday as fresh fighting broke out between the US and Iran, fuelling inflation risks. Investors see rates reaching 3.0% by December and 3.5% next year as the central bank shifts from outright stimulus to a more neutral policy stance. “For FX, we see downside risks for the NZD around this meeting, given the high hurdle for the RBNZ to validate market pricing,” said Francesco Pesole, a FX strategist at ING, who is tipping two more rate hikes to 3.0%. “A less hawkish RBNZ than markets anticipate could limit gains and keep the pair capped around 0.60.” Across