NZD/USD seeks stabilization above 0.6400 as US Dollar continues downside

• NZD/USD is looking for comfortable stability above 0.6400 amid the declining US Dollar Index.
• A significant decline in the US PPI indicates that the overall demand has turned subdued now.
• The RBNZ has paused its rate-hiking spree for now to restrict the burden on the economy.

The NZD/USD pair is aiming to shift auction above the round-level resistance of 0.6400 in the Asian session. The Kiwi asset has got enormous strength as the US Dollar Index (DXY) has slipped below the psychological support of 100.00. The USD Index has dropped to near 99.60 as the United States economy is swiftly approaching towards 2% inflation scenario due to aggressive policy-tightening from the Federal Reserve (Fed).

S&P500 futures have posted nominal losses in Tokyo. However, the overall market mood is quite upbeat as a significant decline in the US Producer Price Index (PPI) indicates that the overall demand has turned subdued now. Contrary to the USD Index, the yields offered on 10-year US Treasury bonds have rebounded to 3.77%.

June’s PPI report conveyed that monthly headline and core figures were expanded at a nominal pace of 0.1%. Annual PPI has severely softened to 0.1%, which indicates that the impact of lower gasoline prices has entirely offset higher prices for core inputs. After the soft inflation report, a follow-up of more-than-expected deceleration in price pressures at factory gates has meaningfully propelled chances of only one more interest rate hike from the Federal Reserve (Fed) by the year-end.

As per the CME Fedwatch tool, the chances of a 25 basis point (bp) interest rate hike in July are above 92%. Still, there is hope that Fed chair Jerome Powell could skip policy-tightening for the second time.

Meanwhile, the New Zealand Dollar is on the buying list of investors as the Reserve Bank of New Zealand (RBNZ) has paused its rate-hiking spree for now to restrict the burden on the economy. The outlook of New Zealand has completely dampened and further policy-tightening could have done more worse. Investors should note that interest rates by the RBNZ are at 5.5%.