NZD/USD declines to near 0.5650 as dovish RBNZ, weak growth overshadow US tariff relief
- NZD/USD loses ground to near 0.5655 in Tuesday’s Asian session.
- The dovish RBNZ's stance and weak New Zealand growth undermine the Kiwi.
- New Zealand lifted US tariffs on $1.25 billion in exports.
The NZD/USD pair drifts lower to around 0.5655 during the Asian trading hours on Tuesday. The New Zealand Dollar (NZD) softens against the US Dollar (USD) amid an imminent rate cut from the Reserve Bank of New Zealand (RBNZ). Traders await the release of the US September Nonfarm Payrolls (NFP) report later on Thursday.
The RBNZ cut the Official Cash Rate (OCR) to 2.5% at its October meeting after a larger-than-expected 0.9% contraction in Gross Domestic Product (GDP) for the second quarter of 2025. A further reduction of 25 basis points (bps) to 2.25% is widely anticipated at the next meeting on November 26, 2025. The RBNZ has already delivered a series of rate cuts throughout 2025 in an attempt to stimulate a struggling economy.
The prospect of the RBNZ's aggressive rate-cutting policy overshadowed the US decision to roll back tariffs on Kiwi exports. This, in turn, could exert some selling pressure on the NZD and acts as a tailwind for the pair. In the near term
Meanwhile, US President Donald Trump lifted tariffs on more than 200 food products in response to rising US grocery prices. On Sunday, New Zealand welcomed the announcement that it would remove additional tariffs on a range of New Zealand agricultural products, including beef, offal, and kiwi fruit.
Trump removed tariffs on New Zealand exports on more than 200 food products, including beef, amid consumer concerns about rising US grocery prices. It is worth about NZ$2.21 billion ($1.25 billion) annually.
Hawkish remarks from Fed policymakers ahead of a deluge of US economic data spooked traders and could weigh on the USD. Kansas City Fed President Jeffery Schmid said on Friday that monetary policy should lean against demand growth, adding that current Fed policy is “modestly restrictive,” which he believes is appropriate.
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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