The New Zealand dollar fell broadly in Asian trading on Thursday against a basket of major and minor currencies, extending its losses for the second consecutive day against the US dollar, retreating from a seven-week high amid accelerating correction and profit-taking, in addition to the continued recovery of the greenback from multi-year lows.

Data released in New Zealand showed a sharper-than-expected economic contraction in the second quarter, boosting expectations of deeper interest rate cuts by the Reserve Bank of New Zealand this year.

Price Overview

NZD/USD today: The New Zealand dollar dropped about 0.9% to 0.5911, from an opening of 0.5963, after touching a high of 0.5970.

On Wednesday, the kiwi ended down more than 0.4% versus the US dollar — its first loss in three sessions — after earlier hitting a seven-week high of 0.6008 amid correction and profit-taking.

US Dollar

The US dollar index rose about 0.2% on Thursday, extending gains for a second straight session, recovering from a 3½-year low of 96.22, reflecting continued rebound against a basket of global currencies.

Beyond bargain-hunting, the dollar’s rebound followed a cautious Federal Reserve stance on further rate cuts. On Wednesday, the Fed trimmed rates by a quarter-point as expected, and Chair Jerome Powell described the move as a “risk-management cut” in response to labor market weakness, stressing the Fed is in no rush to ease aggressively.

Sharp Economic Contraction in New Zealand

Fresh data showed New Zealand’s GDP shrank 0.9% in Q2, the steepest drop since Q3 last year, far worse than forecasts of a 0.3% decline. The economy had grown 0.9% in Q1.

New Zealand Interest Rates

Following the data, odds of a 25 bps cut at the October 8 RBNZ meeting jumped above 90%.

Futures pricing now points to a policy rate of 2.5% by year-end.

Westpac revised its forecast for the next RBNZ meeting to a half-point cut instead of a quarter-point.

The US Federal Reserve announced on Wednesday its decision to cut the benchmark interest rate by 25 basis points, from 4.50% to 4.25%, in a move that was broadly in line with market expectations.

The massive surge in energy demand from data centers is driving an “all options on the table” approach to energy security. The AI boom is pushing investments toward alternative energy sources that were previously overlooked and underfunded, including geothermal energy. While this carbon-free source currently makes up just 0.4% of the US energy mix, many experts believe it is poised for a breakout, supported by bipartisan backing, advancements in geothermal technologies, and rapidly shifting dynamics in energy markets.

Cindy Taff, CEO of geothermal company Sage Geosystems, told The Hill earlier this year: “This will be the decade of geothermal energy.” She added that investments are rising sharply, with a favorable political environment supporting strong R&D in the sector. Although geothermal remains “10 to 15 years behind” wind and solar, Taff and other industry insiders are optimistic about its emerging commercial potential.

The US Department of Energy projects that next-generation “enhanced” geothermal systems could provide about 90 gigawatts of clean energy by 2050 — enough to power more than 65 million homes. Still, the sector faces major hurdles, primarily high upfront and operational costs that constrain expansion.

A 2019 DOE report titled GeoVision: Harnessing the Heat Beneath Our Feet noted: “Growth as a national geothermal solution requires overcoming major technical and non-technical barriers to reduce costs and lower risks. Subsurface exploration remains the biggest obstacle due to its high costs, complexity, and risks.”

But the investment landscape has shifted dramatically since 2019, especially with the tech sector stepping in to support geothermal development in response to soaring data center demand. Big players like Meta and Alphabet (Google and Facebook’s parent) have partnered with geothermal startups. Breakthroughs in deep drilling to reach high underground temperatures have also accelerated in recent years, with startups borrowing tools and techniques from hydraulic fracturing and even nuclear fusion research. These companies are also innovating to address challenges like high water consumption, at a time when capital is flowing into the sector.

In Utah, one next-generation geothermal startup believes it has found a way around some of these costs. Rodatherm Energy Corp., which recently raised $38 million in Series A funding, announced plans for a pilot project using a closed-loop geothermal system that relies on refrigerants instead of water. According to Bloomberg: “Building a sealed, closed system that uses refrigerants similar to those in heat pumps instead of water to generate electricity would allow the company to cut costs and improve financial viability.” The components normally corroded by water would not need frequent replacement, while conserving water is critical in Utah, the project site.

Bloomberg added that Rodatherm is one of many geothermal firms benefitting from the “AI-driven energy boom.” Enhancing geothermal’s potential is seen as a possible game-changer for both the AI sector and US energy security, since geothermal can provide near-unlimited clean power without the variability tied to wind and solar.

A recent report by the independent New York–based Rhodium Group noted: “Geothermal energy could economically meet up to 64% of expected demand growth by the early 2030s, provided core assumptions about the sector and the political and economic environment hold.”

The report concluded: “Policymakers, tech companies, and geothermal developers must move quickly to achieve the speed and scale needed to seize this opportunity. Geothermal energy could be a key solution to meeting the rising electricity needs of data centers.”

Borrowing costs began to ease for some Canadians on Wednesday after the Bank of Canada announced its first interest rate cut since March, lowering its overnight policy rate by 25 basis points, from 2.75% to 2.5%.

Commercial lenders, such as private banks, base their own lending rates on the central bank’s benchmark rate.

The Bank of Canada pointed to a “weaker economy” amid the ongoing trade war, noting that the latest GDP reports and a rise in the unemployment rate to over 7% last month meant that “a rate cut was appropriate.”

At the same time, the bank said inflation has remained relatively stable, with consumer and business price growth staying within the 1% to 3% annual target range.

The bank’s statement said: “With a weaker economy and reduced inflation risks, the policy committee judged that lowering the interest rate was appropriate to achieve a better balance of risks.”

It added: “The disruptive effects of trade shifts will continue to add costs even as they weigh negatively on economic activity. The governing council is proceeding cautiously, paying close attention to risks and uncertainty. The bank remains focused on ensuring Canadians’ confidence in price stability during this period of global turbulence.”

The Bank of Canada had kept its benchmark rate unchanged for the past three meetings, with Governor Tiff Macklem repeatedly stressing that “uncertainty” in the economic outlook required a more cautious monetary stance — particularly in light of the trade war and tariff policies.