The New Zealand dollar appreciated toward $0.618, hitting its highest levels in nearly two weeks amid growing expectations that the US Federal Reserve will start cutting interest rates earlier than other major central banks.
In his testimony before the US Senate, Fed Chair Powell indicated that the central bank could be closer to dialing back restrictive policy if signs of moderating inflation prove sustainable.
Domestically, Reserve Bank of New Zealand Chief Economist Paul Conway said earlier this week that the kiwi could strengthen if the US Fed started cutting rates toward the end of the year while domestic rates remained elevated.
However, he argued that such a scenario would bring down inflationary pressures and could force the RBNZ to ease monetary settings sooner than anticipated.
The RBNZ kept the cash rate unchanged for the fifth straight meeting at 5.5% during its February policy meeting and lowered its forecast for a peak in rates to 5.6% from 5.7%.
