• NZD/USD falls sharply, hitting its lowest level since November near 0.5700.
• Rising geopolitical tensions in the Middle East boost demand for the US Dollar.
• Markets expect the Fed to keep interest rates steady as policymakers assess economic risks.

NZD/USD trades around 0.5715 on Monday, down 0.60% on the day at the time of writing, after falling earlier to its lowest level since November near 0.5700. The pair remains under heavy pressure as the US Dollar (USD) strengthens amid rising geopolitical tensions and a cautious market environment.

Demand for the Greenback is supported by growing risk aversion linked to the ongoing conflict involving the United States (US) and Iran. On Monday, US President Donald Trump said Washington is engaged in “serious discussions” with what he described as a “new and more reasonable regime” in Iran aimed at ending US military operations. However, he also warned that the US could target Iran’s key energy infrastructure if negotiations fail and if the Strait of Hormuz is not reopened to commercial traffic.

These comments have heightened geopolitical concerns around global Oil supply. Rising Oil prices are contributing to stronger demand for the US Dollar, as global Crude transactions are largely denominated in USD. Against this backdrop, the US Dollar Index (DXY), which tracks the value of the Greenback against a basket of six major currencies, is trading around 100.54, hovering close to the ten-month highs reached earlier this month.

Meanwhile, Federal Reserve (Fed) Chair Jerome Powell struck a cautious tone in remarks delivered on Monday, stating that monetary policy is currently “in a good place to wait and see” as policymakers evaluate the economic consequences of recent global developments. Powell reiterated the Fed’s commitment to bringing inflation sustainably back to the 2% target while acknowledging that supply shocks, including those linked to geopolitical events, can complicate the outlook.

According to the CME FedWatch tool, markets increasingly expect the Fed to keep interest rates unchanged through this year, reversing earlier expectations that borrowing costs could rise again by the end of the year. This higher-for-longer policy outlook continues to support the US Dollar and weigh on risk-sensitive currencies such as the New Zealand Dollar (NZD).

Looking ahead, investors will monitor upcoming economic releases from New Zealand and China for further direction. In New Zealand, the ANZ Business Confidence and Activity Outlook surveys are scheduled for release on Tuesday. Market participants will also closely watch China’s March Purchasing Managers Index (PMI) figures later this week, both official and private, given China’s role as New Zealand’s largest trading partner.