New Zealand Dollar extends rally as traders await RBNZ rate decision

• The New Zealand Dollar holds positive ground in Tuesday’s early Asian session. 
• Reduced bets for a RBNZ rate cut and signs of stronger demand from China supported the Kiwi. 
• Rising Middle East geopolitical risks might limit the pair’s downside. 
• The US Producer Price Index (PPI) will be in the spotlight on Tuesday before the RBNZ rate decision. 

The New Zealand Dollar (NZD) trades on a stronger note on Tuesday amid the modest decline of the Greenback. The stronger-than-expected New Zealand employment report last week diminished the possibility of the Reserve Bank of New Zealand (RBNZ) rate cut on Wednesday, which continues to support the Kiwi. Additionally, signs that Chinese demand is improving could contribute to the NZD’s upside as China is New Zealand’s largest trading partner.

On the other hand, safe-haven buying amid elevated geopolitical tensions in the Middle East might push the US Dollar (USD) higher. The RBNZ interest rate decision and press conference on Wednesday will be closely watched. The hawkish messages from RBNZ Governor Adrian Orr might lift the NZD against the USD in the near term. Elsewhere, traders will keep an eye on the US economic data, which should shed further light on the Federal Reserve’s (Fed) outlook for rates. The Producer Price Index (PPI), Consumer Price Index (CPI) and Retail Sales will be released on Tuesday, Wednesday and Thursday, respectively.