NZD/USD remains above 0.6250 near monthly highs, receives support from dovish Fedspeak

• NZD/USD gains ground due to risk-on sentiment amid dovish Fedspeak.
• Minneapolis Fed President Kashkari anticipates additional rate cuts in 2024, although expects them to be smaller than previous reductions.
• The New Zealand Dollar found support from a range of stimulus measures implemented by its close trading partner, China.

NZD/USD extends its upside for the second consecutive day, which could be attributed to the improved risk sentiment following the dovish sentiment surrounding the Federal Reserve's (Fed) policy outlook. The NZD/USD pair trades around its monthly high of 0.6280 level during the Asian session on Tuesday.

The US Dollar (USD) receives downward pressure following the dovish Fedspeak. Minneapolis Fed President Neel Kashkari said on Monday that he believes there should be and will be additional interest rate cuts in 2024. However, Kashkari expects future cuts to be smaller than the one from the September meeting. Additionally, Chicago Fed President Austan Goolsbee noted, "Many more rate cuts are likely needed over the next year, rates need to come down significantly," per Reuters.

Federal Reserve policymakers anticipate rate cuts amounting to 50 basis points by the end of 2024. Meanwhile, the CME FedWatch Tool indicates a 50% chance of a 75 basis point reduction during the last policy meeting of this year in December, which would lower the Fed's rate to a range of 4.0-4.25% by year-end.

Minneapolis Fed President Neel Kashkari said on Monday that he believes there should be and will be additional interest rate cuts in 2024. However, Kashkari expects future cuts to be smaller than the one from the September meeting. Additionally, Chicago Fed President Austan Goolsbee noted, "Many more rate cuts are likely needed over the next year, rates need to come down significantly," per Reuters.

The New Zealand Dollar (NZD) gained support from a series of stimulus measures introduced by China, New Zealand's largest trading partner. The People's Bank of China (PBoC) provided CNY 74.5 billion in liquidity to the banking system through a 14-day reverse repo, lowering the rate from 1.95% to 1.85%. Additionally, the PBoC injected CNY 160.1 billion via a 7-day reverse repo, maintaining the rate at 1.7%.

The Reserve Bank of New Zealand (RBNZ) remains on track for additional rate cuts this year, with markets fully anticipating another 25 basis points reduction in October. Recent data showed that the economy contracted in the second quarter, highlighting persistent economic weakness in New Zealand.