- NZD/USD trades with a bearish bias near 0.5890 in Tuesday’s early Asian session.
- Markets pared expectations of future rate cuts by the US Fed.
- ANZ analysts forecast a 50 bps rate cut from the RBNZ at its November meeting next week.
The NZD/USD pair trades with mild losses around 0.5890 during the early Asian session on Tuesday. The pair edges lower amid the consolidation of the Greenback. Later on Tuesday, investors will keep an eye on the US Building Permits and Housing Starts for October.
The US Dollar Index (DXY), which measures the USD against a basket of currencies, retraces from a one-year high above 107.00 to near 106.20. However, the downside of the Greenback might be capped as investors expect that the incoming Trump administration would focus on lowering taxes and raising tariffs, which could stoke inflation and slow the path of rate cuts from the Federal Reserve (Fed).
Boston Fed president Susan Collins said on Friday that rate reductions could be paused as soon as the December meeting, but it depends on upcoming data on jobs and inflation. According to the CME FedWatch Tool, the markets have priced in nearly 58.7% chance of the 25 basis points (bps) rate cut by the Fed at the December meeting.
On the Kiwi front, the rising expectation of jumbo interest rate cuts by the Reserve Bank of New Zealand (RBNZ) next week weighs on the New Zealand Dollar (NZD). ANZ analysts forecast a 50 basis points (bps) reduction from the RBNZ on November 27. “We expect a 50bp cut to 4.25% next week. That would be consistent with RBNZ's October messaging, economists’ forecasts, and market pricing. Data since the October Monetary Policy Review has been mixed, but no data looks likely to upset the apple cart,” noted ANZ analysts.
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.
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
Editors’ Picks
AUD/USD keeps range around 0.6500 after RBA Minutes
AUD/USD trades in a narrow range at around 0.6500 in Tuesday's Asian trading. The pair draws some support from the hawkish RBA Minutes and China's stimulus hopes but the upside remains limited ahead of mid-tier US data and Fedspeak.
USD/JPY pulls back sharply to 154.00 amid looming Japanese intervention risks
USD/JPY is testing bids just above 154.00 in the Asian session on Tuesday after facing rejection at 154.70. There are no catalysts seen behind the latest leg down but looming Japanese internetion remains a risk to the pair's upside. The pair seems to have surrendered to some technical selling.
Gold climbs to one-week top on softer US bond yields, geopolitical tensions
Gold price (XAU/USD) attracted some haven flows after posting its steepest weekly drop in more than three years last week and snapped a six-day losing streak on Monday amid heightened geopolitical tensions.
Bitcoin could see another parabolic run following rising institutional interest
Bitcoin (BTC) began the week positively, rising over 3% above the $91K threshold on Monday. Despite the recent rise, BTC could begin another extended bullish move as top firms are increasing their Bitcoin holdings and potentially adopting it as a reserve asset.
The week ahead: Powell stumps the US stock rally as Bitcoin surges, as we wait Nvidia earnings, UK CPI
The mood music is shifting for the Trump trade. Stocks fell sharply at the end of last week, led by big tech. The S&P 500 was down by more than 2% last week, its weakest performance in 2 months, while the Nasdaq was lower by 3%. The market has now given back half of the post-Trump election win gains.
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.