The New Zealand dollar edged up to $0.588 on Monday, extending gains from the previous session, as investors continued to monitor developments in the Middle East. Negotiations between the US and Iran have stalled, leaving the Strait of Hormuz constrained and keeping energy prices elevated. Higher oil and gas costs have increased the risk of monetary tightening. Last week’s data showed inflation in New Zealand was higher than forecasts and remained above the Reserve Bank of New Zealand’s 1-3% target range. Price pressures also expected to intensify further in the second quarter when the full impact of higher energy costs feeds into the data, strengthening expectations that the RBNZ may begin raising interest rates in the coming months. Still, some caution remains, as the Middle East conflict threatened to derail the country’s fragile economic recovery. Traders now see around a 60% chance of a 25bps rate hike in May, with a move in July fully priced in.