- NZD/USD trades on a stronger note around 0.5915 in Wednesday’s Asian session, up 0.17% on the day.
- China's NBS Manufacturing PMI for July came in better than expected; Non-Manufacturing PMI was in line with the consensus.
- US Fed is widely expected to hold rate in the range of 5.25%-5.50% at its July meeting on Wednesday.
The NZD/USD pair extends recovery near 0.5915 Asian trading hours on Wednesday. The pair edges higher after the stronger-than-expected Chinese Manufacturing Purchasing Managers' Index (PMI) data for July. Investors will shift their attention to the Federal Reserve’s (Fed) interest rate decision, which is scheduled for Wednesday.
Data released by the National Bureau of Statistics (NBS) on Wednesday showed that the country’s Manufacturing PMI declined to 49.4 in July from 49.5 in June, beating the expectations of 49.3. Meanwhile, the NBS Non-Manufacturing PMI dropped to 50.2 in July versus 50.5 prior, which is in line with the market consensus of 50.2. The better-than-expected Chinese PMI readings provide some support to the New Zealand Dollar (NZD) as China is a major trading partner of New Zealand.
However, the growing speculation for an early interest rate cut by the Reserve Bank of New Zealand (RBNZ) might cap the pair’s upside in the near term. Investors expect the RBNZ rate cuts, with traders pricing 14 basis points (bps) of cuts in August, indicating a 55% chance of a rate cut soon.
On the USD’s front, the Fed will announce its interest rate decision later in the day, with no change in rate expected. Traders will closely watch Fed Chair Jerome Powell's remarks from the press conference as Fed officials might set the stage for an easing policy at its September meeting. Any dovish comments from Fed’s Powell might exert some selling pressure on the Greenback and create a tailwind for NZD/USD. Traders are now pricing in a 100% possibility of a Fed rate cut by at least a quarter percentage point in September, according to data from CME FedWatch Tool.
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
EUR/USD holds below 1.0850, the path of least resistance is to the downside
EUR/USD trades on a stronger note around 1.0825, snapping the two-day losing streak during the Asian session on Wednesday. However, the upside of the major pair might be capped amid the uncertainty surrounding further rate cuts in September by the European Central Bank after disappointing economic growth data from Germany.
USD/JPY trades flat below 153.00 after BoJ surprise-led wild swings
USD/JPY is trading modestly flat below 153.00, digesting the Bank of Japan's (BoJ) surprise interest-rate hike by 15 bps. The pair saw wild swings on either side after the BoJ announcements. Governor Ueda's presser eyed.
Gold bulls take a breather ahead of Fed interest rate decision
Gold price has paused its previous upswing in Asian trading on Wednesday, as buyers take a breather and gather pace ahead of the all-important US Federal Reserve policy announcements.
Solana price eyes rally as US SEC says SOL is not a security
Solana price faces a pullback by the weekly resistance and as of Wednesday, trades slightly higher by 0.88% at $181.13. On-chain data shows that SOL's daily active addresses are rising, signaling greater blockchain usage.
FOMC preview: Growing confidence of a Fed rate cut in September
US data should give officials more confidence that inflation is heading to 2% and we suspect attention will start focusing on achieving a ‘soft landing’ for the economy. This week’s FOMC meeting should lay the groundwork for a September rate cut.