NZD/USD stalls below 0.5800 amid mixed data from China, risk-off markets
- The New Zealand Dollar's recovery from 0.5750 lows has stalled below 0.5800 this week.
- Business data from China revealed that manufacturing activity stalled and the services sector contracted in September.
- In the US, JOLTS Job Openings and Consumer Confidence data will provide further insight into the US economic momentum.
The New Zealand Dollar is clinging to moderate gains on Tuesday after bouncing from multi-month lows at 0.5750 on Friday, but remains unable to find acceptance above 0.5800, weighed by cautious markets and uninspiring data from China, New Zealand’s main trading partner.
China’s Official PMI figures released earlier on Tuesday revealed that manufacturing activity stagnated in September, at the 50.0 level, against market expectations of a steady 50.3 reading. On the positive side, services activity improved to 49.8 from 49.4, still remaining at levels consistent with contraction, which hints at a poor contribution to the GDP growth.
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The Kiwi, however, remains buoyed by the US Dollar’s weakness as investors are wary of the consequences of a highly likely government closure in the US. Talks between Trump and congressional leaders on Monday ended without progress, and the US Vice President, JD Vance, affirmed that the shutdown is imminent.
In the US calendar, the focus today is on the US JOLTS Job Openings, which are expected to have eased to 7.10 million in August, from 7.18 million in July. Apart from that. The Conference Board’s Consumer Sentiment Index and some Fed speakers might provide some distraction from the federal government shutdown.
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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