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1 Apr 2025
NZD/USD holds steady around 0.5675-80 area, above multi-week low ahead of Trump’s tariffs
- NZD/USD lacks any firm intraday direction on Tuesday amid mixed fundamental cues.
- An improvement in the global risk sentiment underpins the Kiiwi amid a softer USD.
- The upside remains capped as traders await Trump’s reciprocal tariffs announcement.
The NZD/USD pair struggles to capitalize on the previous day's modest bounce from the 0.5650-0.5645 region or a nearly four-week low and oscillates in a narrow band during the Asian session on Tuesday. Spot prices currently trade around the 0.5675-0.5680 area, nearly unchanged for the day amid mixed fundamental cues.
Asian stocks tracked overnight gains on Wall Street and recovered slightly amid some repositioning trade ahead of US President Donald Trump's reciprocal tariffs announcement. Furthermore, the growing acceptance that a tariff-driven slowdown in US economic growth might force the Federal Reserve (Fed) to resume its rate-cutting cycle soon keeps the US Dollar (USD) bulls on the defensive. This, in turn, acts as a tailwind for the NZD/USD pair.
Adding to this, the better-than-expected China's Caixin Manufacturing Purchasing Managers' Index (PMI), which rose to 51.2 in March from 50.8 in the previous month, further underpins antipodean currencies, including the New Zealand Dollar (NZD). That said, persistent worries about the potential economic fallout from Trump's aggressive trade policies hold back traders from placing fresh directional bets and cap the upside for the NZD/USD pair.
Traders now look forward to important US macro releases, scheduled at the start of a new month, starting with the JOLTS Jobs Openings data and ISM Manufacturing PMI later today, for some meaningful impetus. The focus, however, will remain glued to Trump's impending reciprocal tariffs, which will play a key role in influencing the broader risk sentiment. This, in turn, will drive the USD demand and produce short-term opportunities around the NZD/USD pair.
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.