The risk-on impulse provided a modest boost to the perceived riskier kiwi on Thursday. Hawkish Fed expectations acted as a tailwind for the USD and capped gains for the pair. The NZD/USD pair held on to its modest gains through the first half of the European session, albeit has retreated few pips from daily tops and was last seen trading around the 0.6915-20 region. The pair built on the previous day's goodish rebound from one-week lows and gained some positive traction during the early part of the trading action on Thursday. The risk-on impulse in the markets undermined the safe-haven US dollar, which, in turn, extended some support to the perceived riskier kiwi.
The global risk sentiment got a boost after Russian leaders reassured Europe on gas supplies. Adding to this, the top US Senate Republican Mitch McConnell said that his party would allow an extension of the federal debt ceiling into December to avert a federal debt default and further boosted investors' confidence.
That said, expectations for an early policy tightening by the Fed, along with an uptick in the US Treasury bond yields acted as a tailwind for the USD and capped gains for the NZD/USD pair. Investors seem convinced that the Fed will soon begin tapering its bond purchases and possibly raise interest rates in 2022.
Nevertheless, the NZD/USD pair, so far, has managed to hold steady above the 0.6900 mark as traders look forward to the release of US Weekly Initial Jobless Claims for a fresh impetus. Apart from this, the US bond yields and the broader market risk sentiment, will influence the USD and produce some trading opportunities.