NZD/USD rises to nine-month highs near 0.6350 as China injects fresh monetary stimulus

• NZD/USD has marked a nine-month high of 0.6355 on Wednesday.
• The New Zealand Dollar gains ground as the largest export partner China has injected fresh monetary stimulus.
• The US Dollar struggles following a weaker consumer confidence data adding to dovish sentiment surrounding the Fed.

NZD/USD extends its gains for the third successive session, trading around 0.6340 during the Asian hours on Wednesday. The pair marked a nine-month high of 0.6355 earlier in the day. The upside of the New Zealand Dollar (NZD) could be attributed to a stronger outlook for foreign currency inflows amid fresh monetary stimulus by New Zealand's largest export partner China.

People's Bank of China (PBOC) Governor Pan Gongsheng announced on Tuesday that China will reduce the reserve requirement ratio (RRR) by 50 basis points (bps). Gongsheng also noted that the central bank would lower the 7-day repo rate from 1.7% to 1.5%, and reduce the down payment for second homes from 25% to 15%. Additionally, the PBOC cut the one-year Medium-term Lending Facility (MLF) rate from 2.30% to 2.0% on Thursday, following the last reduction in July 2024, when the rate was lowered from 2.50%.

Additionally, the Kiwi Dollar receives support from the stronger purchasing power of neighboring Australians after a hawkish hold by the Reserve Bank of Australia (RBA) lifted the Australian Dollar (AUD). The RBA held the Official Cash Rate (OCR) steady at 4.35% on Tuesday. RBA Governor Michele Bullock also confirmed that rates will remain on hold for now and clarified that a rate hike was not explicitly considered during the meeting.

The US Dollar (USD) received downward pressure following softer-than-expected consumer confidence data from the United States (US) released on Tuesday, which added to dovish expectations for the Federal Reserve (Fed) for its further policy decision. US Consumer Confidence Index fell to 98.7 in September from an upwardly revised 105.6 in August. This figure registered the biggest decline since August 2021.

On Tuesday, Federal Reserve Governor Michelle Bowman stated that key inflation indicators are still "uncomfortably above" the 2% target, urging caution as the Fed moves forward with interest rate cuts. Despite this, she expressed a preference for a more conventional approach, advocating for a quarter percentage point reduction.