NZD/USD sees more downside to 0.6750 amid aggressive Fed’s tightening bets

• NZD/USD eyes more weakness on rising odds of an interest rate hike by the Fed.
• The RBNZ has hiked its OCR by 50 bps to reduce the risks of inflation.
• FOMC member John Williams advocated a 50 bps interest rate elevation by the Fed.

The NZD/USD pair is hovering around Thursday’s low at 0.6767 and is likely to extend losses after tumbling below the previous trading session. The asset has remained vulnerable over the past few trading sessions after failing to sustain above the psychological resistance of 0.7000.

The pair have been dropping continuously since Wednesday after the announcement of the Official Cash Rate (OCR) decision by the Reserve bank of New Zealand (RBNZ). The RBNZ hiked its OCR by 50 basis points (bps) considering the risks of soaring inflation due to higher energy and food items bills. Formally, the OCR rate has been elevated to 1.5%.

Also, the modest performance from the Business NZ Purchase Managers Index (PMI) failed to underpin the kiwi against the greenback. Business NZ reported the PMI at 53.8, minutely higher than the market consensus of 53.7 and the previous print of 53.6.

Meanwhile, a solid rebound in the US dollar index (DXY) has pushed it above 100.00 on Thursday. Uncertainty amid the long weekend in the broader markets advocated liquidity channelization into the safe-haven assets. Also, the hawkish speech from the Fed President and Federal Open Market Committee (FOMC) member John Williams supported the sheer bounce in the DXY. Fed’s Williams stated that the Fed should consider a 50 bps interest rate hike. Also, containing higher inflation will be difficult in tight labor market conditions.