NZD/USD remains below five-month highs near 0.6000 due to trade policy focus
- NZD/USD hovers near the five-month high of 0.5979, reached on Thursday.
- Investors remain focused on US trade policy developments, particularly due to New Zealand’s significant export relationship with China.
- The NZD stays rangebound as expectations of further monetary easing by the Reserve Bank of New Zealand.
NZD/USD is trading subdued around 0.5970 during Friday’s Asian session, holding near Thursday’s five-month high of 0.5979 after seven consecutive days of gains. The pair could see further upside as the US Dollar (USD) weakens amid rising concerns over the economic fallout from US tariffs. However, trading volumes are likely to remain thin due to the Good Friday holiday.
Investors are keeping a close eye on developments in US trade policy, especially given New Zealand’s strong export ties with China, its largest trading partner. On Thursday, US President Donald Trump noted that China had made several overtures, adding, “I don't want to go higher on China tariffs. If China tariffs go higher, people won’t buy.” He expressed optimism that a trade deal could be reached within three to four weeks.
On the economic data front, US Initial Jobless Claims fell to 215,000 for the week ending April 12, beating expectations and down from a revised 224,000. However, Continuing Claims rose by 41,000 to 1.885 million for the week ending April 5.
The New Zealand Dollar (NZD) remains rangebound as expectations of further easing by the Reserve Bank of New Zealand (RBNZ) weigh on sentiment. With inflation still within the RBNZ’s target range, markets are pricing in a rate cut in May and anticipate the Official Cash Rate to fall to 2.75% by year-end.
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.