New Zealand Dollar gathers strength to near 0.5950 after China holds loan rates steady in August
- NZD/USD gains traction to around 0.5950 in Thursday’s early Asian session.
- China left the benchmark lending rates steady for a 15th consecutive month in August.
- Cool US inflation have dampened market expectations for a Fed rate hike.
The NZD/USD pair gains momentum to near 0.5950 during the Asian trading hours on Thursday. The pair holds near a two-and-a-half-month high, bolstered by hawkish Reserve Bank of New Zealand (RBNZ) tone and softer US inflation data.
The People’s Bank of China (PBOC) left its Loan Prime Rates (LPRs) unchanged on Thursday. The one-year and five-year LPRs were at 3.00% and 3.50%, respectively.
Additionally, China's Commerce Ministry announced a decision on corporate tax rates for enterprises related to anti-dumping measures on imported polyoxymethylene from the United States (US), the European Union (EU), Taiwan and Japan, Reuters reported.
Hotter-than-expected New Zealand CPI inflation data has cemented expectations for continued monetary tightening, with swaps pricing in up to three further RBNZ rate hikes through early 2027.
On the other hand, traders reduce bets on the US Federal Reserve (Fed) rate increase in September, weighing on the Greenback and creating a tailwind for the pair. Markets are now pricing a 32.7% probability of a Fed rate hike at the September policy meeting, down from 47% a month earlier, according to the CME FedWatch Tool.
NZD edges above average as BNY questions pricing for further RBNZ hikes
Strategists at BNY observe that the Kiwi has firmed, with the NZD “now trading slightly above the rolling 12‑month average.” However, they remain unconvinced by the current rates curve, noting that “we continue to doubt the current market pricing of interest rates expectations, where two more Reserve Bank of New Zealand (RBNZ) hikes are expected by year end.” While they acknowledge that “domestic activity remains robust,” BNY argues that “inflation expectations remain relatively well-anchored,” tempering the case for additional tightening despite the currency’s resilience.
Technical Analysis: NZD/USD keeps a bullish vibe above the key 100-day SMA
In the daily chart, NZD/USD maintains a bullish near-term bias as spot holds above the 100-day simple moving average (SMA) and the Bollinger middle band. Price is nearing the Bollinger upper band, while the Relative Strength Index (14) at 66 shows firm but not yet extreme positive momentum, hinting that the pair remains supported on dips but could face profit-taking closer to the recent highs.
On the topside, immediate resistance is located at the Bollinger upper band near 0.5960, where a clear daily close above would open the way for an extension of the advance. On the downside, initial support emerges at the Bollinger middle band around 0.5865, followed by the 100-day SMA at 0.5835 and the lower Bollinger band near 0.5775, with this stacked demand zone reinforcing the constructive bias as long as price holds above it.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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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