• NZD/USD loses ground, pressured by renewed risk aversion.
• Tensions between the US and Iran support demand for safe-haven assets.
• Diverging monetary policy expectations between the Fed and the RBNZ frame price action.

NZD/USD trades around 0.5890 on Tuesday, down 0.35% on the day, after failing to hold above the 0.5900 level. The pair moves lower as the US Dollar (USD) strengthens, supported by increased demand for safe-haven assets.

The Greenback benefits from persistent geopolitical uncertainty linked to the stalemate in negotiations between the United States (US) and Iran. US President Donald Trump is unlikely to accept Iran’s proposal regarding the Strait of Hormuz, while the lack of progress on the nuclear issue continues to fuel risk aversion and underpin the US currency.

At the same time, the US Dollar (USD) is supported by expectations of higher-for-longer interest rates from the Federal Reserve (Fed). Markets widely anticipate a pause at this week’s meeting, with rates expected to remain within the 3.5%-3.75% range. However, the resilience of certain economic indicators, such as the Conference Board Consumer Confidence Index, which rose to 92.8 in April, supports US yields and, in turn, the US currency.

Meanwhile, investors remain cautious ahead of the Federal Open Market Committee (FOMC) decision, closely watching for signals on the future policy path, even as markets continue to price in monetary easing later in the year.

On the New Zealand side, the New Zealand Dollar (NZD) finds some support from expectations of a more restrictive monetary policy stance. The Reserve Bank of New Zealand (RBNZ) could maintain a cautious tone or even consider tightening to bring inflation back to its 2% target midpoint. Markets are already pricing in a potential rate hike as early as May, following stronger-than-expected inflation data.

This contrast between a steady Fed supported by elevated yields and a potentially more hawkish RBNZ helps limit the downside in NZD/USD.