NZD/USD rises to near 0.5800 following US-Iran ceasefire, RBNZ decision eyed
- NZD/USD rises amid risk-on sentiment after President Trump agrees to pause Iran bombing for two weeks.
- An Iranian official said negotiations with the US will take place in Pakistan to finalize remaining details and agreements.
- Traders expect the RBNZ to extend its pause in rate cuts for a second straight meeting on Wednesday.
NZD/USD extends its winning streak for the third successive day, trading around 0.5790 during the Asian hours on Wednesday. The pair appreciates amid risk-on sentiment after US President Donald Trump agrees to suspend Iran bombing for two weeks.
Trump shared in a post on Truth Social late Tuesday that he’d agreed to a two-week ceasefire with Iran on the condition that Iran agree to reopen the critical Strait of Hormuz. A White House official said that Israel has also agreed to the ceasefire.
An Iranian official stated that negotiations with the US will be held in Islamabad, Pakistan, to finalize details, aiming to confirm Iran’s battlefield achievements politically within a maximum of 15 days. Iran added that the meeting will begin on Friday and may be extended if both sides agree.
However, Iran continues to attack the Middle East and Israel as missile alerts keep sounding. The Israeli military said it has identified missiles launched from Iran towards Israel. The Qatar Defence Ministry also confirmed that armed forces intercepted the missile attack targeting Qatar.
Traders expect the Reserve Bank of New Zealand (RBNZ) to extend the pause on its current interest rate-cutting cycle for the second consecutive meeting on Wednesday, leaving the Official Cash Rate (OCR) unadjusted at 2.25%, as the Iran war adds uncertainty to the economic and inflation outlook. Attention will also be on the Monetary Policy Review (MPR) and the Minutes of the meeting. RBNZ Governor Dr. Anna Breman will also hold the post-monetary policy meeting press conference.
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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