The US Dollar maintained its strength against both the New Zealand Dollar and the Canadian Dollar during the Asian session on Wednesday, as investors awaited the release of the FOMC Minutes for further guidance on the US Federal Reserve's policy path [1][2]. The NZD/USD pair extended its decline from the 0.5925 area, reaching a fresh weekly low near the mid-0.5800s, while the USD/CAD pair consolidated around the 1.3900 mark, unable to build on its recent recovery from the lowest level since June 3 [1][2].
Geopolitical tensions, particularly the ongoing US-Iran standoff over the Strait of Hormuz, contributed to a risk premium supporting the US Dollar. President Donald Trump asserted that the US is not in talks with Iran and that the naval blockade of Iranian ports remains in effect, with Tehran keeping the strategic waterway closed and demanding US concessions for shipping to resume [1]. These developments, along with rising oil prices due to fears of global supply disruptions, have revived inflation concerns and kept US Treasury yields elevated [1][2]. West Texas Intermediate (WTI) crude oil reached a nearly three-week high, further fueling inflationary jitters [2].
In the US bond market, the 30-year Treasury yield climbed above 5.3%, its highest level since 2007, as noted by BNY’s Geoff Yu, who highlighted that the long end of the curve is increasingly dictating financial conditions. This move in yields is seen as a driver of higher global financing costs and a source of support for the Dollar, as investors demand greater compensation for duration and inflation risk [2].
For the NZD/USD pair, the Reserve Bank of New Zealand's hawkish stance, emphasizing the need to withdraw some policy support, could help limit losses. Brown Brothers Harriman’s Elias Haddad pointed out that above-target inflation, a favorable domestic growth outlook, and a policy rate near the lower end of the RBNZ’s neutral range (2.20%-4.10%) argue for additional rate hikes, with the swaps curve pricing in 75bps of tightening over the next twelve months to 3.25% [1]. Technically, NZD/USD holds a constructive near-term bias above the 200-period SMA at 0.5821, with resistance at 0.5924 and support at 0.5854 [1].
Meanwhile, the USD/CAD pair was influenced by last-minute talks between US President Donald Trump and Canadian Prime Minister Mark Carney to avert 50% US tariffs on $20 billion of Canadian products, with the deadline set for Wednesday, August 19 [2]. The uncertainty surrounding the outcome kept traders cautious and the pair range-bound. Rising oil prices provided support for the Canadian Dollar, capping gains in USD/CAD. Technically, the pair holds above the 50.00% Fibonacci retracement and the 200-day SMA near 1.3848, with resistance at 1.3981 and 1.4081, and support at 1.3818 and 1.3703 [2].
CONCLUSION
The US Dollar's strength is underpinned by geopolitical risks, rising Treasury yields, and inflation concerns, leading to declines in both NZD/USD and subdued action in USD/CAD. Market participants are awaiting the FOMC Minutes and the outcome of US-Canada tariff negotiations for further direction. Elevated oil prices and central bank policy outlooks remain key factors influencing both currency pairs.