USD flows: FX subdued even with the fragile backdrop
Kiwi the outperformer on the RBNZ rate hike
Elsewhere FX remains subdued even with some fragility in the backdrop
Further US-Iran flare-up and RBNZ hike the main news overnight. That former had a certain inevitability to it after Iran fired missiles on a couple of ships Monday. Iran responded with targeting sites in Bahrain and Kuwait after the US hit various air defence and missile and launch sites and revoked oil sales authorisation. Oil markets relatively (maybe too?) measured, but having the acknowledge the fresh threat to the speed of supply flow, up around $2 ½ . FX is largely proving resilient to the development though NOK has gained a little ground.
On the RBNZ, the hike was enough to lift NZD/USD back above 0.57 with a high just short of last week’s preemptive best, which brings it back into the 2026 range again. That can be positive so long as external events, like Iran, don’t interrupt the recovery.
The Kospi also had another bad session, dropping 5%, actually taking it into bear market territory, and that remains something to watch even if the spillover from this especially wild market is not yet proving that large, Nasdaq -0.2%and only sitting at the June range lows so far.
Looking ahead, the main focal point, Iran news aside, will be the FOMC Minutes later and that may tend to reinforce the market’s slightly wait and see mood this morning even with the slightly fragile backdrop on show.