- NZD/USD refreshes an over two-week high near 0.5700 amid weakness in the US Dollar.
- The upbeat market mood amid a delay in Trump’s reciprocal tariff plans has diminished the USD’s safe-haven demand.
- The RBNZ is expected to cut its Official Cash Rate (OCR) by 50 bps to 3.75% on Wednesday.
The NZD/USD pair posts a fresh over two-week high around 0.5700. The Kiwi pair strengthens as the US Dollar (USD) underperforms its peers amid a cheerful market mood. The demand for risk-sensitive assets has increased as fears of an immediate global trade war evaporate.
On Thursday, United States (US) President Donald Trump didn’t reveal a detailed reciprocal tariff plan and guided his team to work on that. However, market participants anticipated that reciprocal tariffs would be announced after Trump’s tweet on his account at Truth Social that that “Three great weeks, perhaps the best ever, but today is the big one: reciprocal tariffs!!! Make America great again!!!", which came in early North American trading hours on Thursday.
An unexpected delay in Trump’s reciprocal plan diminished the USD’s safe-haven appeal. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, revisits an almost four-week low around 106.80.
Meanwhile, investors await the Reserve Bank of New Zealand’s (RBNZ) first monetary policy meeting of the year, which is scheduled on Wednesday. Traders expect the RBNZ to continue easing the monetary policy further at the current pace of 50 basis points (bps). Such a scenario will be unfavorable for the New Zealand Dollar (NZD).
NZD/USD rebounds strongly from the support zone plotted around 0.5500 on a weekly timeframe. However, the outlook of the Kiwi pair is still bearish as the 20-week Exponential Moving Average (EMA) near 0.5777 is sloping downwards.
The 14-week Relative Strength Index (RSI) attempts to return inside the 40.00-60.00 range. A fresh bearish momentum would trigger if the RSI fails to do the same.
The Kiwi pair could decline to near round-level supports of 0.5400 and 0.5300 if it breaks below the 13-year low of 0.5470.
On the flip side, a decisive break above the November 29 high of 0.5930 could drive the pair to the November 15 high of 0.5970 and the psychological resistance of 0.6000.
NZD/USD weekly chart
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.
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