NZD/USD declines to over three-week low, around mid-0.6800s amid modest USD strength

 

• NZD/USD witnessed selling for the third straight day and retreated further from the YTD high.
• The Fed’s hawkish outlook, elevated US bond yields underpinned the USD and exerted pressure.
• A positive risk tone might cap the safe-haven USD and limit losses for the perceived riskier kiwi.

The NZD/USD pair continued losing ground through the mid-European session and dropped to over a three-week low, around mid-0.6800s in the last hour.

The pair prolonged this week's sharp retracement slide from the 0.7035 region, or the highest level since November 2021 and witnessed some follow-through selling for the third successive day on Friday. The downward trajectory was exclusively sponsored by the blowout US dollar rally, bolstered by the Fed's hawkish outlook.

In fact, the March 15-16 FOMC minutes released on Wednesday showed that policymakers were prepared to hike interest rates by 50 bps at upcoming meetings. Moreover, there was a general agreement about reducing the Fed's massive near $9 trillion balance sheet at a maximum pace of $95 billion per month to tighten financial conditions.