NZD/USD edges lower to near 0.5950 amid solid US Dollar, dovish RBNZ


  • NZD/USD depreciates as the US Dollar receives support from Trump’s potential fiscal policies.
  • The NZD struggles as the Trump administration may impose a 60% tariff on imports from China.
  • Trump’s proposed fiscal policies could lead the Fed to adopt a more hawkish monetary policy.

The NZD/USD pair remains subdued near 0.5950 during European trading hours on Tuesday. Concerns are mounting that President-Elect Donald Trump’s expected tariff increases on Chinese goods could pressure the NZD, given New Zealand's close trade relationship with China.

Morgan Stanley’s analysis divides the Trump administration's macroeconomic policies into three primary areas: tariffs, immigration, and fiscal measures. The report anticipates that tariff policies will take precedence, with expectations for an immediate 10% tariff increase globally and a more substantial 60% increase targeting Chinese imports.

Adding to downward pressure on the NZD, China’s recent stimulus measures have underwhelmed investor expectations, weakening demand prospects for New Zealand's largest trading partner. Last week, China introduced a 10 trillion Yuan debt package but refrained from implementing direct economic stimulus measures, disappointing markets.

Meanwhile, the Reserve Bank of New Zealand (RBNZ) is anticipated to announce a more substantial 75 basis point rate cut later this month due to the significant time between meetings. A 50 basis point cut has already been fully priced in by markets.

The US Dollar (USD) continues to gain strength following the confirmation of Trump’s victory in the US election. Market analysts believe that Trump’s proposed fiscal policies could stimulate investment, spending, and labor demand, potentially heightening inflation risks. This could lead the Federal Reserve (Fed) to adopt a more hawkish monetary policy.

However, Federal Reserve Chair Jerome Powell stated on Thursday that he doesn’t anticipate Trump’s potential return to the White House impacting the Fed’s near-term policy decisions. “We don’t guess, speculate, and we don’t assume what future government policy choices will be,” Powell noted after the bank decided to lower interest rates by 25 basis points to a range of 4.50%-4.75%, as expected.

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.

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

AUD/USD struggles near multi-month low; looks to US CPI for fresh impetus

AUD/USD struggles near multi-month low; looks to US CPI for fresh impetus

AUD/USD languishes near a multi-month low during the Asian session on Wednesday and seems vulnerable amid a bullish USD. Expectations that inflationary import tariffs from US President-elect Donald Trump will push up prices and limit the scope for the Fed to cut rates remain supportive of elevated US bond yields.

AUD/USD News
USD/JPY sits near its highest level since July, close to 155.00 as traders await US CPI

USD/JPY sits near its highest level since July, close to 155.00 as traders await US CPI

USD/JPY stands firm near its highest level since July 30 amid speculations that a fragile minority government in Japan will make it difficult for the BoJ to tighten its monetary policy further. Moreover, fears that US President-elect Donald Trump might again hit Japan with protectionist trade measures continue to undermine the JPY. 

USD/JPY News
Gold price oscillates around $2,600, just above a nearly two-month low ahead of US inflation

Gold price oscillates around $2,600, just above a nearly two-month low ahead of US inflation

Gold price consolidates its recent heavy losses to the lowest level since September 20 as bears opt to pause for a breather ahead of the crucial US CPI report, which will influence Fed rate-cut expectations and provide a fresh impetus. 

Gold News
Ripple could rally 50% following renewed investor interest

Ripple could rally 50% following renewed investor interest

Ripple's XRP rallied nearly 20% on Tuesday, defying the correction seen in Bitcoin and Ethereum as investors seem to be flocking toward the remittance-based token. XRP could rally nearly 50% if it sustains a firm close above the neckline resistance of an inverted head and shoulders pattern.

Read more
Five fundamentals: Fallout from the US election, inflation, and a timely speech from Powell stand out

Five fundamentals: Fallout from the US election, inflation, and a timely speech from Powell stand out Premium

What a week – the US election lived up to their hype, at least when it comes to market volatility. There is no time to rest, with politics, geopolitics, and economic data promising more volatility ahead.

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures