New Zealand Dollar gains momentum above 0.6050 amid RBNZ caution
- NZD/USD drifts higher to around 0.6055 in Thursday’s early European session.
- Westpac sees the RBNZ keeping its policy settings unchanged at its February meeting, nudging the first rate hike to December 2026.
- Traders trimmed bets for a March Fed rate cut after the upbeat US jobs data.
The NZD/USD pair gains traction near 0.6055 during the early European trading hours on Thursday. However, the expectations of a slow and cautious Reserve Bank of New Zealand (RBNZ) tightening cycle might cap the upside for the pair. The release of the US Consumer Price Index (CPI) inflation report will be in the spotlight later on Friday.
New Zealand's Unemployment Rate climbed to 5.4% in the fourth quarter (Q4) of 2025, the highest since 2015. Softer labor data push out bets for the RBNZ tightening, which might weigh on the Kiwi.
The New Zealand central bank is expected to keep its Official Cash Rate (OCR) steady at its February meeting while modestly bringing forward the timing of its first projected rate increase, according to a new research note from Westpac.
On the USD’s front, stronger-than-expected US jobs data for January reduces the chances the US Federal Reserve (Fed) will see a need to cut interest rates again by midyear. This, in turn, could provide some support to the Greenback and create a headwind for the pair. Markets are now pricing in nearly a 94% odds that the Fed will leave rates unchanged at its next meeting, up from 80% from the previous day, according to the CME FedWatch tool.
Traders will closely monitor the US inflation data on Friday for fresh impetus. The headline and core CPI are expected to show a rise of 2.5% YoY in January. On a monthly basis, the headline and core CPI are estimated to show an increase of 0.3% during the same period. Any signs of softer inflation in the US could undermine the USD against the NZD in the near term.
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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