- NZD/USD finds support as the US Dollar falters amid ongoing trade-related uncertainties.
- Market attention now turns to Thursday’s upcoming releases of US Retail Sales and Producer Price Index (PPI) data.
- The New Zealand Dollar is drawing support as trade tensions between the US and China show tentative signs of easing.
NZD/USD appreciates after registering a loss of more than 0.50% in the previous session, trading around 0.5910 during the early European hours on Thursday. The NZD/USD pair receives support as the US Dollar also struggles as investors weigh ongoing trade-related uncertainties despite a slight easing in tensions. Market focus now shifts to the release of US Retail Sales and Producer Price Index (PPI) data later in the day.
Speculation is building that Washington may prefer a weaker dollar to bolster its trade position. The Trump administration has argued that a strong Greenback, relative to weaker regional currencies, disadvantages US exporters.
However, downside pressure on the USD may be limited. Improved global trade sentiment has eased recession concerns, reducing expectations for aggressive Federal Reserve (Fed) rate cuts. According to LSEG data, markets now price in a 74% chance of a 25-basis-point cut in September, down from earlier forecasts for a July cut.
The New Zealand Dollar (NZD) is gaining support amid signs of easing tensions in the US-China trade dispute, largely due to New Zealand’s strong trade ties with China. The US and China have reached a temporary agreement to scale back mutual tariffs, easing concerns about a potential full-scale trade war between the world’s two largest economies. As part of the deal, the US reduced tariffs on Chinese goods from 145% to 30%, while China cut tariffs on US imports from 125% to 10%. These revised rates will remain in place for 90 days.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.