NZD/USD softens below 0.5650 amid hopes of US shutdown end
- NZD/USD weakens to around 0.5640 in Tuesday’s Asian session.
- NZ two-year inflation expectations arrived at 2.28% QoQ in Q4.
- Majority of the US Senate passed legislation to reopen the federal government.
The NZD/USD pair loses traction near 0.5640 during the Asian trading hours on Tuesday. The New Zealand Dollar (NZD) softens against the US Dollar (USD) after the Reserve Bank of New Zealand’s (RBNZ) latest monetary conditions survey. Traders will keep an eye on the US ADP Employment Change weekly report later on Tuesday.
Data released by the RBNZ on Tuesday revealed that New Zealand's two-year inflation expectation, seen as the time frame when RBNZ policy action will filter through to prices, was unchanged at 2.28% in Q4 2025, compared to 2.28% seen in Q3.
Meanwhile, the NZ average one-year inflation expectations rose to 2.39% in Q4 versus 2.37% prior. The Kiwi remains weak against the USD in an immediate reaction to the RBNZ Inflation Expectations data.
The Senate has voted to approve the bill to end the government shutdown, as expected. The bill will head to the House of Representatives. If it passes in both chambers of Congress, it will head to US President Donald Trump to be signed into law.
Trump on Monday voiced support for a bipartisan agreement to end the US shutdown, a significant step that makes it likely the government will reopen within days. Hopes of an end to the longest US government shutdown in history could provide some support to the Greenback and act as a headwind for the pair.
If the shutdown is lifted, the attention will shift to the US economic data, especially the US Nonfarm Payrolls (NFP) report, which has not been published since government operations ground to a halt more than a month ago. Any signs of weakness in the US labour market could exert some selling pressure on the USD and help limit the pair’s losses 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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