NZD/USD strengthens above 0.5750 on growing risk of US government shutdown
- NZD/USD gains momentum around 0.5770 in Monday’s Asian session.
- A possible government shutdown could undermine the US Dollar.
- Analysts noted the RBNZ is taking a more dovish stance than expected.
The NZD/USD pair holds positive ground near 0.5770 during the early Asian trading hours on Monday. The US Dollar (USD) edges lower against the New Zealand Dollar (NZD) amid the growing risk of a US government shutdown. Traders brace for the Fedspeak later on Monday.
US President Donald Trump will meet with the top four congressional leaders at the White House on Monday as the deadline for a possible government shutdown looms. Without funding legislation, parts of the government would close on Wednesday, the first day of the U.S. government's 2026 fiscal year. This, in turn, could drag the Greenback lower and act as a tailwind for the pair.
Additionally, the US Federal Reserve (Fed) rate cut hopes remain intact after the US Personal Consumption Expenditures (PCE) Price Index report, which might contribute to the USD’s downside. The US PCE Price Index rose 2.7% YoY in August, compared to 2.6% in the previous reading, in line with analyst forecasts. The core PCE, which excludes food and energy prices, arrived at 2.9% YoY during the same period, matching expectations.
On the other hand, the prospect of further Official Cash Rate (OCR) cuts by the Reserve Bank of New Zealand (RBNZ) this year could weigh on the Kiwi against the USD. Anna Breman has been appointed the new RBNZ Governor and will begin her role in early December. Acting Governor Christian Hawkesby will preside over the upcoming October and November meetings, where additional rate cuts are likely, as the recent New Zealand Gross Domestic Product (GDP) came in weaker than expected.
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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