NZD Rebounds Above 0.5650 on Lower Yields, Dovish Fed Stance

The New Zealand dollar strengthened against the US dollar on Friday, trading around 0.56703 after hitting a three-week high of 0.5667, up approximately 0.8% on the day, marking the strongest performance among major currencies.

**Yield Pullback Aligns with Fed Signals**

US Treasury yields retreated from multi-decade highs, with the 10-year yield posting consecutive declines and the 30-year yield also moving lower, eroding the dollar's yield advantage. Following dovish remarks from New York Fed President Williams, market bets on a Fed pause this month intensified, further pressuring the greenback. According to CME FedWatch data, as of press time, the market priced in a near 29.3% probability of a rate hike later this month, up from pre-CPI levels but still relatively low overall.

**Local Policy Expectations Offer Support**

Westpac expects the Reserve Bank of New Zealand to hold the official cash rate at 2.75% this month, followed by a 25-basis-point hike in December and two additional increases in early 2027. This relatively moderate tightening path, combined with an improving external yield environment, has created room for the NZD's rebound. Additionally, China's September CPI rose 0.9% year-on-year, slightly below expectations, yet the New Zealand dollar was not significantly weighed down, indicating a positive market sentiment.

**Technical Concerns Persist**

Despite clear short-term rebound momentum, the technical picture has not fully turned bullish. NZD/USD remains below the Bollinger Band midline near 0.5665, while the 14-day RSI is approaching 33, suggesting oversold conditions may be easing but not yet sufficient to confirm a bullish reversal. Further resistance lies at 0.5778 and the 100-day moving average at 0.5795, with the lower Bollinger Band at 0.5555 providing immediate support.