NZD/USD remains steady after slipping below 0.5900
- NZD/USD loses ground as the US Dollar strengthens on safe-haven demand amid stalled US–Iran peace talks.
- President Trump appears unlikely to accept Iran’s proposal to reopen the Strait of Hormuz.
- The RBNZ may stay cautious or tighten policy to return inflation to the 2% midpoint.
NZD/USD depreciates after two days of gains, trading around 0.5890 during the European hours on Tuesday. The pair loses ground as the US Dollar (USD) advances due to increased safe-haven demand amid stalled United States (US)-Iran peace talks.
US President Donald Trump appears unlikely to accept Iran’s proposal to end its closure of the Strait of Hormuz. Meanwhile, Marco Rubio signaled that any deal excluding Iran’s nuclear program is unlikely to be considered. Iran proposed reopening Hormuz if the US lifts its blockade and ends the war, while postponing nuclear discussions.
The Greenback also strengthens on rising expectations of prolonged higher rates from the Federal Reserve. The Fed is widely expected to hold rates steady at Wednesday’s April meeting, maintaining the federal funds target range at 3.50%–3.75% for a third consecutive pause. Fed nominee Kevin Warsh has emphasized policy independence, even as markets continue to price in a more aggressive rate-cutting path ahead.
The Reserve Bank of New Zealand (RBNZ) is likely to stay cautious or consider tightening to return inflation to the 2% midpoint amid persistent price pressures. Markets are pricing in a rate hike from the Reserve Bank of New Zealand in May following a hot inflation report for the first quarter, with price pressures expected to intensify further in the second quarter as the full impact of higher energy costs feeds into the data.
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.