Kiwi moves sideways as Yen intervention and Middle East risks dominate

The Kiwi has had a quieter week, moving largely sideways so far thisweek with little domestic catalyst to lean on. This has left it moreexposed to broader USD moves and risk sentiment swings.Local data has been quite limited so far this week, with globaldevelopments taking the limelight. The main development came earlierthis week where both US and Japan authorities confirmed they hadjointly intervened in FX markets to support the yen. This was the firstcoordinated intervention since early 2011, and the first joint US-Japanbuying intervention since Mid-1998 during the Asian financial crisis. Reports suggests that the intervention may have totalled close toUS$80bn, much larger than Japan’s attempts earlier this year, with Tokyodoing the bulk of the buying while the Fed appeared to support via eurosales. The scale of direct US involvement remains unclear, though thesignalling effect is likely more important than the size of any actual USflows. The move follows growing concern in Washington that a weakeryen has been pushing Japanese bond yields higher, with worries thiscould eventually spill over into US Treasuries. That said, intervention hashistorically bought time rather than reversed the trend, with successhinging on softer US data keeping the Fed on hold and on the BOJbacking it up with a September rate hike, which markets fully expect.On the Middle East, Brent crude prices fell sharply at this week's openafter Trump said Iran peace talks had resumed, having cancelled aplanned strike at Saudi Arabia's urging. Iran denied any talks were takingplace, saying it was only discussing safe passage through the Strait ofHormuz with Oman. OPEC+ approved another modest quota increase,completing the unwind of 2023 output cuts and leaving room for moresupply once the conflict ends.That said, the physical disruption in the region remains largely intact. TheUS blockade of Iranian ports continues to redirect shipping, Saudiexports have fallen, and a tanker near Oman reported an explosion inrecent days, underscoring that threats to vessels persist even assentiment has improved. Disruption has also broadened beyond the Gulf,with Ukrainian drone strikes repeatedly shutting down a key RussianBlack Sea terminal. Despite this accumulation of supply risks, prices havenot spiked as sharply as earlier in the conflict, reflecting the large bufferof stock releases and demand destruction already absorbed by themarket. That buffer is now considerably smaller, leaving prices vulnerableto a sharper repricing should disruptions worsen further.Looking ahead, the key domestic focus is Q2 labour market data. Marketsand the RBNZ expect employment growth of just 0.1% QoQ, withunemployment ticking up to 5.4% from 5.3%. While the RBNZ's singlemandate means labour data typically carries less weight, this releaseshould offer a clearer read on how the economy fared through adisrupted quarter. A stronger outcome would reinforce the case forcontinued hiking in September, consistent with our view that the Bankdelivers one more hike next month before holding through year end,followed by a final hike in February 2027.