NZD/USD holds gains above 0.5750 ahead of Trump-Xi meeting
- NZD/USD remains stronger as ANZ Business Confidence rose to 58.1 in October from 49.6 prior.
- The NZD gains support from improved market sentiment, driven by optimism surrounding a potential US-China trade deal.
- Fed Chair Powell noted that another rate cut in December is far from certain.
NZD/USD recovers its recent losses from the previous session, trading around 0.5770 during the Asian hours on Thursday. The pair appreciates as the New Zealand Dollar (NZD) receives support following ANZ Business Confidence, which surged to 58.1 in October from 49.6 in the previous month, marking the highest reading since February. Meanwhile, Activity Outlook improved to 44.6 for the same month, from 43.4 prior.
China’s Premier Li Qiang stressed the need to balance development with security, strengthen risk-prevention mechanisms, and safeguard long-term growth through policy preparedness and systemic stability. Any shift in China’s economic conditions could also affect the New Zealand Dollar, given the close trade ties between China and New Zealand.
The NZD is also supported by improved market sentiment, fueled by optimism over the potential for a trade deal between the United States (US) and China. US President Donald Trump and Chinese President Xi Jinping are set to meet later today in South Korea.
The Federal Reserve (Fed) delivered a widely anticipated 25 basis point interest rate cut on Wednesday. This marks the second straight interest rate cut from the Fed, albeit with some policymakers making a mental note of a general increase in some inflationary pressures through the second half of the year, but not enough to deter another leg down in interest rates.
The US Dollar (USD) gained ground after the Fed acknowledged it would continue to ease back on Quantitative Easing (QE) practices, with the process of drawing down the Fed's mortgage-backed asset balance sheet into long-term Treasuries by December 1.
Fed Chair Jerome Powell stated at the post-meeting press conference that the available data indicate little change in the outlook for employment and inflation since the September meeting. Powell noted that the government shutdown will weigh on economic activity while it continues, but should reverse once it ends. He added that another rate cut in December is far from certain, emphasizing that the path forward remains uncertain.
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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