The dollar gained as safe-haven demand rose on renewed Middle East tensions. The New Zealand dollar strengthened after the central bank raised rates and signaled more tightening ahead.
Alpha Score of 64 reflects moderate overall profile with strong momentum, strong value, weak quality, moderate sentiment.
The US dollar climbed to its strongest level in a week during Asian hours Wednesday. The move followed new US strikes on Iran, which pushed investors into safe-haven assets.
The strikes targeted a US base in Bahrain, raising risks to shipping through the Strait of Hormuz. More on the geopolitical backdrop: Iran Strikes US Base in Bahrain, Strait of Hormuz Risk Returns.
The dollar gained against most major peers. The yen also strengthened. Commodity-linked currencies like the Australian and Canadian dollars slipped.
The New Zealand dollar bucked the trend. The Reserve Bank of New Zealand raised its official cash rate by 25 basis points to 2.0%, the first increase in three years. The central bank said inflation was running above its target band and that more tightening would likely be required.
The decision was unanimous. Still, the bank's internal projections showed some disagreement on how fast prices would cool. The RBNZ's forecasts implied at least one more hike this year, with the speed dependent on domestic demand and wage growth. Read more on the split: RBNZ Splits on Inflation Risk Even as Rate Vote Unanimous.
The RBNZ move sets it apart from the Federal Reserve, which has held rates steady in recent meetings. The US central bank next meets in late July. Markets price no change there.
For traders, the divergence reinforces a familiar theme. The dollar benefits from both risk-on and risk-off flows, while the NZD now carries a clear rate advantage over the greenback. The kiwi rose 0.5% against the dollar on the day, outperforming the Australian dollar by a similar margin.
The RBNZ's next policy decision is scheduled for August. The bank said it would assess incoming data on output and employment before moving again.
On the geopolitical front, oil prices rose about 2% on supply disruption fears tied to the Hormuz risk. The dollar's rise did not curb the rally in crude. The risk premium expanded as traders weighed the odds of a broader regional conflict.
The dollar index traded near its session high through the European morning. The euro slipped below $1.12, while sterling held near $1.28. The yen hovered around 104.50 against the dollar, supported by the safe-haven bid but capped by a wide interest rate gap.
Investors now look to the next batch of US economic data, including weekly jobless claims due Thursday. For now, the dollar's path depends on how the Iran situation evolves and whether the RBNZ follow-through materialises in August.
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