The New Zealand dollar strengthened against major currencies as markets increasingly expected the Reserve Bank of New Zealand (RBNZ) to raise interest rates at its next policy meeting. NZD/USD rose 0.4% to $0.6150 in the latest trading session, while annual inflation reached 4.7% in the first quarter, above the RBNZ’s 1%-3% target range, and employment data exceeded forecasts, suggesting the economy is operating near full capacity. Traders assigned a high probability to a late-May rate increase, although the exact meeting date had not been confirmed on the official RBNZ calendar, and priced 75 basis points of cumulative tightening over the next 12 months. The kiwi has also benefited from a weaker US dollar, falling US Treasury yields and China’s decision to leave its August one-year and five-year loan prime rates unchanged at 3.35% and 3.85%. A signal that a series of hikes is possible could extend gains and attract carry-trade flows, while a dovish surprise, weaker global growth, geopolitical tensions, or deteriorating risk sentiment could trigger a pullback. The currency’s outlook also depends on New Zealand inflation and employment data, RBNZ communications, Federal Reserve policy, commodity prices and exporter competitiveness.